The consequences of Bitcoin

Black Swan

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Dr Galen wrote: »

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SeanW

KyussBishop wrote: »

If you have no disagreements with that, it makes the job guarantee a matter of logistics only, not of whether or not it is possible - I'm not going to let you skip past the macro argument, so you can nitpick over details of the actual implementation (with the purpose of remaining eternally 'unconvinced', so you can sneer away at it), when submitting to this overall macro argument completely removes the need for that entire debate.

Only I do;

Inflation can happen for two main reasons;

1. Resources become more scarce, or somoene with a crucial monopoly raises their prices. (Inflation through market causes)
2. The government or central bank prints too much money, causing the value of each individual piece of the currency to fall. (Inflation through government/CB causes)

The only way for the causes of inflation to result in less inflation than they cause is if everyone else (especially those on limited/fixed incomes) takes the hit, accepting the new costs while not recieving a commensurate increase in nominal pay.



I have seeen zero indication that you can just print money for a job guarantee - or for any other reason without limits - and not have inflation.

KyussBishop

There is only inflation through market causes. If the government prints money, that can be left in a bank account doing nothing and will cause no inflation; when that money is spent into the markets, it pushes up against supply constraints (scarce resources), and then causes inflation. It is the spending (and thus, interaction with the markets) not the printing, that causes inflation.

That means inflation is all about the physical resources. Labour is the most important of them all, because when you hit full employment, it is almost impossible to spend more without causing inflation by bidding up wages (that means the limit to spending before inflation, is full employment).

The flipside of that, is that when you don't have full employment, you always have room to spend more - if any supply constraints are hit on the way up to full employment, 'the markets' sort that out automatically (meaning any inflation from that is only temporary) by reallocating resources (switching scarce resources for less scarce ones).

Valmont

I'll ask again for the Nth time, KyussBishop, if the 'jobs guarantee program' costs absolutely nothing and can also feed, clothe, and provide for those under its wing, why not put everybody in the entire country on the program?

You are advocating a program and I am asking why you don't extend it given the features you proclaim it has? Why is this an unreasonable question?

I'm saying ok, you've convinced me that the jobs guarantee program will not need to draw tax from the private sector in order to function effectively and will also not result in massive inflation or hyper-inflation. It is absolutely incontrovertible that what you are describing is an economic policy that can provide people with a good life at absolutely no cost; and you refuse to answer the obvious question of why not just roll it out on a national level and enrich all of our lives for free? What gives? What am I missing? Why could this policy only work on a small scale? Why did you even bring up this program if you weren't willing to explain it to anyone?!

KyussBishop

Valmont wrote: »

I'll ask again for the Nth time, KyussBishop, if the 'jobs guarantee program' costs absolutely nothing and can also feed, clothe, and provide for those under its wing, why not put everybody in the entire country on the program?

You are advocating a program and I am asking why you don't extend it given the features you proclaim it has? Why is this an unreasonable question?

Discussing the job guarantee when we disagree on the macroeconomics, means every disagreement you have with the job guarantee, goes back to your macroeconomic views - that's why the macroeconomic arguments (especially regarding inflation and how it relates to full economic-output/employment) need to be hashed out first.


If everyone in the country were enrolled into the job guarantee, it would not be a job guarantee at all, as that is mutually contradictory.

The job guarantee takes on only the workers the private sector is not currently employing, acting as a public 'employer of last resort', where the private sector then re-hires the workers out of the job guarantee as the private economy improves.

Valmont wrote: »

I'm saying ok, you've convinced me that the jobs guarantee program will not need to draw tax from the private sector in order to function effectively and will also not result in massive inflation or hyper-inflation. It is absolutely incontrovertible that what you are describing is an economic policy that can provide people with a good life at absolutely no cost; and you refuse to answer the obvious question of why not just roll it out on a national level and enrich all of our lives for free? What gives? What am I missing? Why could this policy only work on a small scale? Why did you even bring up this program if you weren't willing to explain it to anyone?!

I'm not convinced that this is what you're saying at all - I think you still disagree with the macroeconomics, and are trying to avoid hashing that out, so you can pick at minutiae in the job guarantee implementation.

Do you agree with the macroeconomics - principally that inflation is not an unsolvable problem, until you get to full economic-output/employment? (it's my impression you are just brushing past that as if it were hypothetical, and are going to switch in your own macroeconomic views later)

recedite

Valmont wrote: »

I wonder why governments around the world don't just replace the private sector entirely with the 'jobs guarantee program' given its inherent qualities.

According to KyussBishop, the program:

(1) Gives unemployed workers a job and a good wage
(2) Costs nothing

If people can employed and paid by the state at absolutely no cost, why not employ every single person in the country in this manner?

That would be a communist system, and it would work if all the jobs were real and productive. However KyussBishop has repeatedly stated the opinion that "the markets" are better at allocating resources within an economy.
So this jobs creation program is only to be used when resources are lying idle, which is a result of lack of credit within the private sector. The money that is created and invested directly into the economy must be a genuine investment. And inflation targets must be adhered to.

In the Zimbabwe situation there are a couple of major differences.
1. No inflation targets.
2. Newly created money not going into productive investments, but going into the pockets of certain people, and very likely leaving the economy to end up in swiss bank accounts.
3. Productivity falling after the seizure of white owned farms and businesses, and handing them over to cronies in the private sector. If they had seized the farms as new state assets, and then employed people (both blacks and whites) to run them, those assets might have remained productive.

SupaNova2

recedite wrote: »

So this jobs creation program is only to be used when resources are lying idle, which is a result of lack of credit within the private sector. The money that is created and invested directly into the economy must be a genuine investment. And inflation targets must be adhered to.

Idle labour which is not only due to the bubble economy but minimum wage, high welfare and regulation, yes. Idle resources? There are no stockpiles of raw materials or ready to go capital goods, so what is there?

KyussBishop

SupaNova2 wrote: »

Idle labour which is not only due to the bubble economy but minimum wage, high welfare and regulation, yes. Idle resources? There are no stockpiles of raw materials or ready to go capital goods, so what is there?

So you're saying there are no physical resources available - throughout all of Europe, we don't have the ability to produce the physical resources (and don't have the ability to import resources not available in Europe) - really?

This, and how inflation (thus full economic-output/employment) relates to the availability of physical resources, is the huge huge macroeconomic argument you (and others) are avoiding.

Your avoidance of that discussion is, again, really conspicuous, because it's not really complicated at all, and if you are forced to concede it, it turns the job guarantee into a political/logistical problem only, it would no longer debatable whether or not it would be practical or possible.

SupaNova2

KyussBishop wrote: »

So you're saying there are no physical resources available

No resources lying idle like has been claimed. Resources would have to be bid away from those with current claims on them.

throughout all of Europe, we don't have the ability to produce the physical resources (and don't have the ability to import resources not available in Europe) - really?

Now your being silly, yeah we produce and yeah we import, but we cannot simply print and import more, now you are making Zimbabwe relevant again, why couldn't they just print and import more?

KyussBishop

SupaNova2 wrote: »

No resources lying idle like has been claimed. Resources would have to be bid away from those with current claims on them.

You're hiding behind the 'resources laying idle' nonsense, to pretend that resources in Europe are scarce - you said it right there in the bolded part: The only way you have to bid away resources, is if they are scarce and production can't be ramped up.

In Europe, we have nearly all the resources we need to ramp up production, with those we don't have easily imported.

SupaNova2 wrote: »

Now your being silly, yeah we produce and yeah we import, but we cannot simply print and import more, now you are making Zimbabwe relevant again, why couldn't they just print and import more?

Are you kidding? What does Europe need to import, that is going to break the bank? That is ridiculous. Europe is resource-rich, and has more than enough capacity to massively increase production, while keeping currency valuation comfortable and manageable

You also completely seem to not understand, that anything we need to import by reaching full-employment today, we have to do in the future anyway, so you are effectively arguing that we should stay stagnant with massive unemployment, if you are saying we should never up our imports again.

Give me one (non-imaginary) solution that you have, which does not require increasing imports in order to restore full employment?


More of the ridiculous hyperinflation accusations again as well. A minor increase in imports leads to hyperinflation, right...that is economic illiteracy and scaremongering, and you know it.

SupaNova2

KyussBishop wrote: »

to pretend that resources in Europe are scarce - you said it right there in the bolded part: The only way you have to bid away resources, is if they are scarce and production can't be ramped up.

Run me through your chain of events here, ECB prints money, gives it to governments to spend on railway(or you choose), government puts in order for steel, demand for steel goes up, supply still the same, price of steel does not rise because..............

KyussBishop

SupaNova2 wrote: »

Run me through your chain of events here, ECB prints money, gives it to governments to spend on railway(or you choose), government puts in order for steel, demand for steel goes up, supply still the same, price of steel does not rise because..............

Where are you pulling this from? We can't produce any greater amount of steel all of a sudden?

KyussBishop

You do understand, that you can increase production of stuff, when the physical materials are available?

SupaNova2

KyussBishop wrote: »

Where are you pulling this from? We can't produce any greater amount of steel all of a sudden?

Exactly a greater amount of steel can't be produced all of a sudden. You want to hire workers to start a project now don't you? You can't increase the supply of steel by turning a dial in a factory, it takes time and has to go through a complicated production process. But you increase demand immediately.

KyussBishop

SupaNova2 wrote: »

Exactly a greater amount of steel can't be produced all of a sudden. You want to hire workers to start a project now don't you? You can't increase the supply of steel by turning a dial in a factory, it takes time and has to go through a complicated production process. But you increase demand immediately.

What you've described is a temporary increase in inflation while private industry adjusts - inflation that goes back down once production is ramped up, so what's the problem?

Nothing stopping you from putting out contracts months (or even years) in advance, giving loads of time to ramp up and avoid inflation altogether, so all you have described here is creating a delay in ramping up, not an inflation problem.

If the physical resources are there, there is nothing stopping you from ramping up production, the primary cost is time - that something takes time to happen, does nothing to invalidate the policies I put forward.

This happens in private markets all the time, as demand vs supply changes.

SupaNova2

KyussBishop wrote: »

What you've described is a temporary increase in inflation while private industry adjusts - inflation that goes back down once production is ramped up, so what's the problem?

You still get inflation as we don't have the ability to ramp up capacity in every industry. We have spare capacity in construction, so you may get a concrete company to supply you with concrete without pushing up the price much, but the staff they re-hire don't spend there money on concrete, but other goods which we do not have spare capacity to supply.

If the physical resources are there, there is nothing stopping you from ramping up production, the primary cost is time - that something takes time to happen, does nothing to invalidate the policies I put forward.

That's the thing they're often not. A crane hire business near me is no more, they sold off their cranes and closed their doors, most of the cranes are abroad now. Supply and demand at work, large supply here, low demand, cranes sold to region with lower supply and higher demand. The excess capacity is not there and ready like you think. Your theory imagines the crane hire business near me just sitting on idle cranes that we can pair up with idle crane operators and put to work.

KyussBishop

SupaNova2 wrote: »

You still get inflation as we don't have the ability to ramp up capacity in every industry. We have spare capacity in construction, so you may get a concrete company to supply you with concrete without pushing up the price much, but the staff they re-hire don't spend there money on concrete, but other goods which we do not have spare capacity to supply.

Of course we have the ability to ramp up capacity in every industry, that is nonsense - if the physical resources exist to do it, then we can do it - and they do. If it's physically possible, it's economically possible - it is only a matter of adequate time.

You're basically arguing at this stage, that we can never get the economy back together at full employment, because we can't ramp up production again - that is the crux of what you are saying, and that is absolute nonsense.

You don't seem to understand that any inflation caused by ramping up production, is only temporary (it goes back down once production has ramped up) and is easily manageable within inflation targets - your argument seems to rest upon scaremongering that inflation will be too great.

It's simple: If we hit inflation targets while still ramping up production, then we just end up ramping-up more slowly until 'the markets' reconfigure to sort out production. All that takes is time. What's the problem?

SupaNova2 wrote: »

That's the thing they're often not. A crane hire business near me is no more, they sold off their cranes and closed their doors, most of the cranes are abroad now. Supply and demand at work, large supply here, low demand, cranes sold to region with lower supply and higher demand. The excess capacity is not there and ready like you think. Your theory imagines the crane hire business near me just sitting on idle cranes that we can pair up with idle crane operators and put to work.

We have the whole of Europe to draw physical resources from, and then we have the rest of the entire planet to draw physical resources from when we can't source stuff in Europe - and there is not a lot we can't source from Europe.

All you are talking about now are production delays, nothing more. The problems you bring up are easily solved by time, which we have plenty of (given that this current crisis has already lasted half a decade, and on this current course has probably another decade and a half to go - not exactly hard for these alternative policies to do better than that).

SupaNova2

In summary:
-We can print money to ramp up production of everything
-The plan can be rolled out Europe wide putting millions to work
-Inflation will be temporary as increased production of everything will just take a little time
-The world will provide us with more resources by us simply printing and giving them currency


:cool:

KyussBishop

SupaNova2 wrote: »

In summary:
-We can print money to ramp up production of everything

With this being largely done by 'the markets', through the spending from workers - in addition to the forward-contracts for materials to be used within public projects.

SupaNova2 wrote: »

-The plan can be rolled out Europe wide putting millions to work
-Inflation will be temporary as increased production of everything will just take a little time

Due to resources having constrained supply due to low production, and with that constraint being eased as production increases (with the only impediment to this, being time), yes.

SupaNova2 wrote: »

-The world will provide us with more resources by us simply printing and giving them currency

No. Businesses in Europe, buy resources from businesses in foreign countries, like happens all the time.


So, you understand that ramping up production within inflation targets only takes time, after which supply-constraints are eased and inflation reduces, allowing more spending to increase employment, until you reach full economic-output/employment.

That makes all inflation before full-employment, a distributional/efficiency problem (needing to switch scarce resources for less scarce resources, and to ramp up production), which is easily kept within inflation targets, and it makes reaching full-employment, the primary time when inflation is unavoidable (because 'workers' become the scarce resource, and any further spending causes wage inflation).

It's simple enough, and it completely blows hyperinflation claims out of the water - do you have any arguments against it?

SupaNova2

With this being largely done by 'the markets', through the spending from workers

Why can't Zimbabwe print and have the markets ramp up production of everything, they have plenty of resources in the ground after all.

No. Businesses in Europe, buy resources from businesses in foreign countries, like happens all the time.

So why doesn't it work for Zimbabwe? Zimbabwe gives money to businesses in Zimbabwe, they buy from businesses in foreign countries.

KyussBishop

SupaNova2 wrote: »

Why can't Zimbabwe print and have the markets ramp up production of everything, they have plenty of resources in the ground after all.



So why doesn't it work for Zimbabwe? Zimbabwe gives money to businesses in Zimbabwe, they buy from businesses in foreign countries.

Right, you have no more arguments, so back to using Zimbabwe - the place where there has been massive industrial destruction which caused hyperinflation, and you are trying to compare the straw-man of "money creation to solve hyperinflation" against "money creation to solve economic crisis".


Do you have any disagreement with the description of production and inflation I put forward (if so, please be specific and point out what you disagree with)? Or are you just going to throw straw-men at it?

If you go down the straw-man route, it's going to become very evident, very quickly, that you are fully aware that you have no argument against the macroeconomics I've described - and more importantly, that you are fully conscious of this (because I know you see that is a straw-man; we've been through variations of this enough times now for it to be blindingly obvious).

PeadarCo

KyussBishop wrote: »

Right, you have no more arguments, so back to using Zimbabwe - the place where there has been massive industrial destruction which caused hyperinflation, and you are trying to compare the straw-man of "money creation to solve hyperinflation" against "money creation to solve economic crisis".


Do you have any disagreement with the description of production and inflation I put forward (if so, please be specific and point out what you disagree with)? Or are you just going to throw straw-men at it?

If you go down the straw-man route, it's going to become very evident, very quickly, that you are fully aware that you have no argument against the macroeconomics I've described - and more importantly, that you are fully conscious of this (because I know you see that is a straw-man; we've been through variations of this enough times now for it to be blindingly obvious).

KyussBishop your whole argument with Zimbabwe and in the link you provided earlier in the thread argued that a drop in supply(Industrial destruction) was responsible for the hyperinflation. While I would agree that a drop in supply will cause price increases(inflation) when demand and all other factors remaining constant.. The problem with Zimbabwe is the rates of in the region of 231,000,000% (http://news.bbc.co.uk/2/hi/africa/7660569.stm) can't be cause by only a drop in supply given that even a drop of supply of 100%(All production of all kinds shuts down) should only cause prices to increase by 100% all other things being equal. The only way the crazy rates the country faced is printing money.

So you can dismiss Zimbabwe but to that you have to show its possible to reach the inflation rates by some other than printing money. Drops in supply on their own won't cause an inflation rate in the region of millions all other factors being equal.

KyussBishop

What? A 100% drop in supply (i.e. complete cessation of all industrial activity ) will cause near-immediate hyperinflation because the supply of food will run out within days, causing it to skyrocket in price.

Inflation doesn't work like currency devaluation - inflation affects specific goods, and can be skyrocketed by the supply of just a limited number of goods disappearing. There are some huge flaws in your understanding of macroeconomics and inflation there.

In Zimbabwe, the industrial destruction started the hyperinflation, and the money printing worsened it - that doesn't change the fact, that comparing Zimbabwe to my policies, is still a straw-man because it's comparing "money creation to solve hyperinflation" against "money creation to solve economic crisis".

PeadarCo

KyussBishop wrote: »

What? A 100% drop in supply (i.e. complete cessation of all industrial activity ) will cause near-immediate hyperinflation because the supply of food will run out within days, causing it to skyrocket in price.

Inflation doesn't work like currency devaluation - inflation affects specific goods, and can be skyrocketed by the supply of just a limited number of goods disappearing. There are some huge flaws in your understanding of macroeconomics and inflation there.

In Zimbabwe, the industrial destruction started the hyperinflation, and the money printing worsened it - that doesn't change the fact, that comparing Zimbabwe to my policies, is still a straw-man because it's comparing "money creation to solve hyperinflation" against "money creation to solve economic crisis".

Personally what started hyperinflation I don't know enough about the situation and given that I've heard it being classified when inflation hits 40% never mind the crazy rates that Zimbabwe hit so I'll let that one slide. Also given the rates money creation wasn't the sole problem which I would agree with you.

The reason I raised it was because it is an extreme example. Making comparing and contrasting very easy and hence your job explaining your policies.

I do see however you are in agreement with my main point in that money creation is not the solution to all the countries ills and can potentially make the situation worse.

Or to summaries I would agree with you that a limited and very carefully controlled money printing can help. However where I do disagree with you is how this printed money is used. However you haven't given any substantive detail on how your job guarantee would work in practice so its impossible to say if it would work.

KyussBishop

PeadarCo wrote: »

Personally what started hyperinflation I don't know enough about the situation and given that I've heard it being classified when inflation hits 40% never mind the crazy rates that Zimbabwe hit so I'll let that one slide. Also given the rates money creation wasn't the sole problem which I would agree with you.

The reason I raised it was because it is an extreme example. Making comparing and contrasting very easy and hence your job explaining your policies.

I do see however you are in agreement with my main point in that money creation is not the solution to all the countries ills and can potentially make the situation worse.

Or to summaries I would agree with you that a limited and very carefully controlled money printing can help. However where I do disagree with you is how this printed money is used. However you haven't given any substantive detail on how your job guarantee would work in practice so its impossible to say if it would work.

It's not an extreme example of any of my policies though - it is entirely unrelated to them.

If you follow my discussion with SupaNova2 above, you see that I am describing how money creation can ramp-up economic output and employment (slowly over time, if need be), while staying within inflation targets, and that it must stop at full economic-output/employment.
Principally, that's describing that it all goes back to the availability of physical resources: Inflation is all about supply constraints in physical resources, so avoiding inflation is about not pushing against those supply constraints.

That macroeconomic argument explains the basic concept allowing money creation to boost the economy, the Job Guarantee just builds upon that to flesh out the details of implementing it (so once the macroeconomics are agreed, it's already just a matter of logistics/implementation, not a matter of 'is this possible?').

PeadarCo

KyussBishop wrote: »

It's not an extreme example of any of my policies though - it is entirely unrelated to them.

If you follow my discussion with SupaNova2 above, you see that I am describing how money creation can ramp-up economic output and employment (slowly over time, if need be), while staying within inflation targets, and that it must stop at full economic-output/employment.
Principally, that's describing that it all goes back to the availability of physical resources: Inflation is all about supply constraints in physical resources, so avoiding inflation is about not pushing against those supply constraints.

That macroeconomic argument explains the basic concept allowing money creation to boost the economy, the Job Guarantee just builds upon that to flesh out the details of implementing it (so once the macroeconomics are agreed, it's already just a matter of logistics/implementation, not a matter of 'is this possible?').

Zimbabwe is an extreme example of money printing so extreme you don't consider it relevant.

The thing is printing money will cause inflation/stop deflation. There's not much you can about it. Obviously how much you print decides how much inflation is caused and other factor on how important it is in the overall scheme of things. The problem with your job guarantee idea is that its very vague. Why shouldn't people be given help to retrain in jobs that the private sector wants. Even in Ireland despite the unemployment there are still areas that are crying out for people.

KyussBishop

PeadarCo wrote: »

Zimbabwe is an extreme example of money printing so extreme you don't consider it relevant.

The thing is printing money will cause inflation/stop deflation. There's not much you can about it. Obviously how much you print decides how much inflation is caused and other factor on how important it is in the overall scheme of things. The problem with your job guarantee idea is that its very vague. Why shouldn't people be given help to retrain in jobs that the private sector wants. Even in Ireland despite the unemployment there are still areas that are crying out for people.

Now you are just ignoring everything I've posted about to carry on with the same assertion. My policies are not just 'money printing', where any old money printing will do, and presenting it like that allows endless opportunities for straw-men.

There was an entire discussion there with SupaNova2 outlining my macroeconomic views, which show how inflation relates to full economic-output/employment - refer to that if you want to discuss it.

You've already shown though, from your last post, that you don't understand how inflation actually works, and don't even understand how completely stopping production in an economy with its own currency, leads to hyperinflation.

SupaNova2

Go Germany!

Originally Posted by CNBC
Virtual currency bitcoin has been recognized by the German Finance Ministry as a "unit of account", meaning it is now legal tender and can be used for tax and trading purposes in the country.

Bitcoins is not classified as e-money or a foreign currency, the Finance Ministry said in a statement, but is rather a financial instrument under German banking rules. It is more akin to "private money" that can be used in "multilateral clearing circles", the Ministry said.

"We should have competition in the production of money. I have long been a proponent of Friedrich August von Hayek scheme to denationalize money. Bitcoins are a first step in this direction,"said Frank Schaeffler, a member of the German parliament's Finance Committee, who has pushed for legal classification of bitcoins.

http://www.cnbc.com/id/100971898

realitykeeper

SupaNova2 wrote: »

Go Germany!



http://www.cnbc.com/id/100971898

I read recently a judge in Texas has adjudicated that bitcoin is legal tender like any other currency. This makes it taxable - unfortunately.

That said, it is inherently different to other currencies because bitcoin codes can simply be emailed from one person to another without the need for traditional institutions like banks and credit card companies. This freedom opens the potential of bypassing the tax net, although this type of tax evasion would require a conspiracy of silence between the buyer and the seller. If the EU were to introduce a transaction tax, some people may be tempted to avoid it via bitcoin transactions.

My concern is if bitcoin were ever to become very successful/popular at the expense of traditional currencies - the only way to stop it would be by shutting down the internet and maybe even phone companies. This may seem bizarre and an extreme reaction but sovereign governments have reacted with extreme measures in the past when faced with bankruptcy.

recedite

realitykeeper wrote: »

My concern is if bitcoin were ever to become very successful/popular at the expense of traditional currencies - the only way to stop it would be by shutting down the internet....

I don't think you need worry about that.

The tax evasion thing is a red herring anyway, there are plenty of businesses out there taking in cash. Cash is exactly the same, it depends on the honesty of the person whether it goes through the accounts or not.