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Comment by cloudwalking | Hacker News Reader

An economist's take on bitcoin: http://www.quora.com/Is-the-cryptocurrency-Bitcoin-a-good-id...

Spoiler: bitcoin is a scam

He is a software developer at "SeatGeek", not an economist. He wrote "Internet Economist" as a joke.

Even if he is right and bitcoin shouldn't be considered a "currency", but rather an asset or a scam to enrich the early adopters, I think there is still a question I wrote above, namely, if it is worth to buy bitcoins for money now.

There's quite a bit of misunderstanding in that post, especially with respect to systemic weaknesses. And a lot of unsubstantiated claims and terrifying graphs (like that tweet graph as something desirable for currency inflation - what it also implies is your savings going up in smoke).

I'd love to find an in-depth debate on Bitcoin from an economic standpoint, but this is not it. It's just more of the same half-understood FUD. And it is a horrible idea when half-understood - IMO, it remains to be seen if it's a horrible idea when fully-understood.

BitCoin i svery similar to a gold backed currency. The fact that nearly all (?) currencies moved off the gold standard should tell you something of how economists view the gold standard.

and economists are always right?, how come so few saw the 2008 crash coming?

bitcoin is born out of a distrust with the current global economic status quo

If you are a subscriber to Peter Schiff's views then moving off the gold standard was actually a big mistake. The comparison to the gold standard is actually what makes me think bitcoin has some legs

How is bitcoin like the gold standard? Bitcoin is backed by what? It's more like a purely speculative currency. It's artificially scarce and worth nothing apart from it's perceived value. At least with gold there are many industrial uses for it. You can't do anything with a bitcoin other than trade it.

It's artificially scarce and worth nothing apart from it's perceived value.

Are there any official currencies that this doesn't apply to?

You have to pay taxes and also settle debts in the official currency. That alone gives it more than mere 'perceived value'. Oh, needing it to buy oil also helps.

Precisely. Holding an official currency gives you the ability to stop the government from putting you in prison for nonpayment of taxes. This is a real tangible value that is a sort of baseline value store for official currencies that does not exist for other currencies.

So, it's just a combination of money = power, and "All power comes from the end of a gun."

Power doesn't come from the gun, but from public legitimacy. In the same manner that it would be considered legitimate for someone to defend themselves with a gun.

That was a reference to Mao.

So, we need a gun store that uses bitcoins.

Governments moved their currencies off the gold standard. Mostly for the self-interest reason of establishing greater control over their currency, often to inflate their way out of debt.

Whether a gold (or Bitcoin) standard is good for the world economy as a whole is irrelevant, since the governments hold the power to implement it (or ban Bitcoin) and will act in their self-interest.

The tweet graph is meant to correlate with desirable growth in money supply, something Bitcoin needs to be liquid. You can have growth in money supply without inflation.

Somebody can fork bitcoin and change that aspect.

He graphs the number of bitcoins over time, which is basically meaningless. If he were to graph the number of transactions, the number of users, or the total value of all bitcoins, he'd get an exponential curve upwards much like the twitter curve.

Weren't "the economists" blamed for the global crisis in the first place?

He might be an economist, but he doesn't know anything about monetary history:

The economic assumptions underpinning the Bitcoin ecosystem are laughable, and ignore hundreds of years of accumulated understanding of how currencies work with each other.

Paper money is about 100 years old. That's it.

By "paper money" do you (and the article's author) actually mean "fiat money" (http://en.wikipedia.org/wiki/Fiat_money) dating back 11th century China? It was in use as early as 18th century America.

The only thing about "paper money" that I can think of that is about 100 years old is the beginning of the departure from the gold standard (http://en.wikipedia.org/wiki/Gold_standard).

And of course the older things are the better they are. For example, we all now 1000 year old medical practices are good and effective whereas recently developed ones suck.

... why would it be true for economic practices? Some experimentation is good, without it there would never be any progress at all.

Appeal to authority based on the age of ideas is something you can only get away with in religion, astrology, and it seems, economic 'science'.

Sure, there is a large chance that new ideas might fail but you can't simply argue against them because they go against old ideas.

I was at the Bank of England museum checking out the first "notes" the other day, and they date back to 1694. That's a little older than 100 years.

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