tag:blogger.com,1999:blog-6189690633638834539.post1841963609464470656..comments2024-03-15T09:21:57.888+01:00Comments on Economics of Bitcoin: Market forces and Fractional Reserve BankingPeter Šurdahttp://www.blogger.com/profile/17346161576941109337noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-6189690633638834539.post-659435855815372932013-01-25T09:07:31.146+01:002013-01-25T09:07:31.146+01:00I would prefer to leave it to the people to expres...I would prefer to leave it to the people to express themselves, I don't want to put words into their mouths. But if I have to express my personal impression, here it goes.<br /><br />In general, I agree with the list you made, just I don't recall Woods' remarks on the topic and I'm not familiar with Robert Wenzel.<br /><br />Jeff Tucker read my master's thesis and he appears to be very positive about Bitcoin. Stephan Kinsella is also positive, there's an interview with him in Bitcoin Magazine issue #5 from December 2012. Walter Block and Joseph Salerno on the other hand don't appear to know much about Bitcoin.<br /><br />George Selgin is somewhere in the middle. He gets some of its aspects very well, but he made some critical remarks. Detlev Schichter is skeptical, but he understands that there is a lot of merit to Bitcoin.<br /><br />My main impression is that the typical Austrian economist is stuck with gold and thinks that if something is to beat gold, it will take a long time, and by that time it will be obvious to anyone that the replacement took place. They don't see how you can predict the outcome of competition among media of exchange, other than to refer to the historical technological and regulatory factors. Therefore, I speculate, they don't see why they should spend time on learning about it.Peter Šurdahttps://www.blogger.com/profile/17346161576941109337noreply@blogger.comtag:blogger.com,1999:blog-6189690633638834539.post-63752047230115020632013-01-25T07:37:23.404+01:002013-01-25T07:37:23.404+01:00Slightly off-topic, but since you seem to be famil...Slightly off-topic, but since you seem to be familiar with the views of prominent Austrians on Bitcoin, do you think you could make a list? E.g.,<br /><br />Doug French: favorable<br />Jeff Tucker: Tentatively favorable<br />Hans Hermann Hoppe: Mostly clueless<br />Guido Hulsmann: Clueless<br />Bob Murphy: Skeptical, mostly mum<br />Tom Woods: Skeptical, mosty mum<br />Robert Wenzel: On the borderline<br /><br />etc.Ahttps://www.blogger.com/profile/15268949335254744445noreply@blogger.comtag:blogger.com,1999:blog-6189690633638834539.post-73641189500986615952013-01-22T14:30:22.961+01:002013-01-22T14:30:22.961+01:00Hello Darren,
sorry for the delay, your comment g...Hello Darren,<br /><br />sorry for the delay, your comment got stuck in the spam and it took me a while to figure out what happened.<br /><br />The storage, I agree, is not costless. But Bitcoin is what I call "form-invariant", it can exist in practically any imaginable form natively, and there is no necessity for a deposit-banking-style service to provide the best offering. By the way, the argument that service providers might be able to provide something extra over native Bitcoin, that will allow them to practice credit expansion is not new, the first serious version of the argument I know of was presented by Eli Gothill: http://www.webisteme.com/blog/?p=192 . Coincidentally, I'll probably meet Eli this weekend at the UNsystem Bitcoin Conference Preview, and I would like to discuss it with him.<br /><br />First of all, not all online wallets are modeled on the deposit system. There are at least two that are native Bitcoin rather than deposits: strongcoin and blockchain.info wallet. They use client-side encryption, so the server can't spend the Bitcoins on its own, it only provides infrastructure for the act of managing the wallet and creating transactions. Second, there are ways of storing it which have not even been possible with previous systems, for example brainwallets (storing Bitcoins in your brain) and multi-key signatures (e.g. "bank" has one key, you have the other one, and only together you can transfer the Bitcons).<br /><br />Some of the hypothetical features might not be present in a usable implementation at the moment, but I expect them to mature and provide a wide variety of options of storing Bitcoins, to serve the consumers in the most fitting way. While I can't completely exclude the possibility of a Bitcoin-substitute to be accepted as a medium of exchange (as it's an empirical issue), I think it is unlikely.Peter Šurdahttps://www.blogger.com/profile/17346161576941109337noreply@blogger.comtag:blogger.com,1999:blog-6189690633638834539.post-19548484628717869742013-01-22T04:09:22.525+01:002013-01-22T04:09:22.525+01:00Hi Jesse,
yes, I'd say it's the same thin...Hi Jesse,<br /><br />yes, I'd say it's the same thing, I just attempt to put it in a more abstract, formal way while you do it based on examples and descriptions of activities. That's not supposed to be a criticism, the descriptive method is better to get people to understand how it works (and might be more persuasive), while my more abstract method is better in making to understand why it works.Peter Šurdahttps://www.blogger.com/profile/17346161576941109337noreply@blogger.comtag:blogger.com,1999:blog-6189690633638834539.post-20553722500379467302013-01-22T04:03:31.156+01:002013-01-22T04:03:31.156+01:00Just out of curiousity, is the FRB analysis I post...Just out of curiousity, is the FRB analysis I posted to reddit comments a couple of weeks ago basically the same thing that you're saying here, or do you think I'm using the wrong terms or mental models for any of it?<br /><br />http://www.reddit.com/r/Bitcoin/comments/15smqp/bitcoin_in_danger_of_becoming_a_fiat_currency/c7pyz7b<br /><br />Thanks, sir. :BJessehttps://www.blogger.com/profile/10390562527411424893noreply@blogger.comtag:blogger.com,1999:blog-6189690633638834539.post-88483520329060137102013-01-22T03:24:31.557+01:002013-01-22T03:24:31.557+01:00Hello JP,
thanks for the reaction. Indeed you are...Hello JP,<br /><br />thanks for the reaction. Indeed you are right, the gold branch and free banking branch disagree on the interpretation of Mises.<br /><br />The gold standard branch argues that according to Mises, any issue of fiduciary media is credit is disequilibrating, and if it is sufficiently extensive, results in a business cycle (I would put in particular Rothbard, Hoppe, de Soto and Block into this category). Some of them argue that in a fully free banking, the market forces will result in a nearly full reserve (Rothbard seems to take this approach). Some argue that freebanking will reach some sort of equilibrium state where the reserve ratio will be stable, and in this state the money supply will be less elastic and thus there won't be a cyclical behaviour (one example that comes to mind is Detlev Schlichter in his "Paper Money Collapse"). Some argue that in a free market, money and credit will be separated (I got this impression from Robert Murphy, for example).<br /><br />The freebankers (represented in particular Selgin and White) argue that the issue of fiduciary media on a free market with commodity monetary base is not disequilibrating, as it is a reaction to bank customer demand, and thus the money supply adjustments are warranted.<br /><br />I think that the freebankers' argument is invalid, and that the gold standardists are probably correct that any issue of fiduciary media is disequilibrating (while I also disagree with their prognoses mentioned above about "what would happen in a free market"). I want to write another blog post about this. I already wrote about it in comments on freebanking.org and uneasymoney.com, but neither Selgin nor Glasner seem to understand my argument so I want to put it together in a bit more elaborate manner.Peter Šurdahttps://www.blogger.com/profile/17346161576941109337noreply@blogger.comtag:blogger.com,1999:blog-6189690633638834539.post-29626910033833405692013-01-22T00:16:16.817+01:002013-01-22T00:16:16.817+01:00Does "Transaction Costs" also include st...Does "Transaction Costs" also include storage costs? While bitcoin transaction costs may be negligable, it's conceivable that users will entrust storage of their bitcoins to "banks" (e.g. to avoid the cost of security), thus opening the door to money substitution. Observe the popularity of online wallets.<br /><br />Perhaps the conclusion should be that it's vital for bitcoin client software to provide "low cost" storage solutions in order to prevent credit expansion taking hold.Anonymoushttps://www.blogger.com/profile/07764121138421838787noreply@blogger.comtag:blogger.com,1999:blog-6189690633638834539.post-70869387207485132562013-01-21T17:42:04.341+01:002013-01-21T17:42:04.341+01:00"Unlike the freebanking branch of the Austria..."Unlike the freebanking branch of the Austrian school, I actually agree with the gold standard branch that credit expansion leads to distortions, such as the business cycle."<br /><br />Good post.<br /><br />Don't the free banking Austrians admit that credit expansion is detrimental, insofar as credit is being lent at a rate below the so-called natural rate?JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.com