What Bitcoin Is Teaching Us

Yes, let's go back to the glory days of the deflationary late-19th century.<p>The reason the Keynesians like currency that slowly decreases in value is because it brought about the longest sustained period of economic growth in human history, without which we would not even have Bitcoin to celebrate right now (the widely adopted technology that makes it possible to implement being a result of aforementioned growth.)<p>If everyone hoards, and never spends, then the economy stalls and then recedes. What's good for us as individuals is terrible for us as a whole.<p>That said, I think BitCoin is very interesting, and if some sort of shorting is introduced to cause a downward pressure on prices then the price could very well stabilize. A stable, slightly deflationary currency is just about as good as a stable, slightly inflationary currency.

I find the Ron Paul/Austrian school camp's complaints that central banking causes bubbles hilarious because their most notable achievements so far have been the creation of two asset bubbles.<p>Since 2008 they have been claiming that monetary policy will usher in hyper inflation and they created a gold/silver asset price bubble. Now the same ideology is being used to create a bitcoin bubble.<p>Even more hilarious is their assertion that a crypto-currency like bitcoin is scarce and limited in supply.<p>Clone the bitcoin github repo, find and replace bitcoin with HollowayCoin, edit a couple lines of code to create a new genesis block and boom I just made my own crypto currency with all the benefits of bitcoin.<p>New crypto coins will become important because the block chain won't scale, and new block chains will need to be created. These alt coins are already being traded for btc on a couple exchanges.<p>These crypto-currencies serve a purpose, but there is no need for them to trade at $230 per coin.

Bitcoin has already taught us that even smart people are not immune to drinking the Kool-Aid. The tech community is quickly separating into two camps that are becoming unintelligible to each other. For some, this article is an amazing piece full of profound insights that justify their decision to buy Bitcoins. For others, it piles weak arguments on top of an assumption that the recent rise in Bitcoin value will continue forever.

The author mistakenly attributes the deflating aspects of a controlled limited supply of Bitcoins (by design) as the cause of the recent surge in valuation while it's really just speculation at this point. Even worse, he's urging everyone to hoard their bitcoins and not spend them because he believes t1 will always be higher than t0. When you undermine the only true value of a currency (which is trading) you might as well place your bets in a Las Vegas casino and get some free drinks while you're at it because the thin line between speculating and gambling has been crossed at this point.

Bitcoin seems to be teaching people exactly what they wanted to believe in the first place, what a coincidence!

"it does what currency should do, which is increase in value over time."<p>What utter rubbish. Bitcoin may or may not survive (as a volatile commodity, like gold), but you buy it now at your peril. It is backed by nothing, and generates no earnings. It started at $.10, and to $.10 it might well return.

Bitcoin is, at most, a payment service similar to Paypal. It is not a true currency nor will it ever be one. All anyone cares about is how it relates to the USD.<p>All government backed currencies at least start on the gold standard. After sufficient time and economic development, some countries (like the US) can move off the gold standard and lend and borrow on reputation alone.<p>Bitcoin was started by people who do not appear to exist, the "money" was printed by a select group of early adopters who still control vast portions of its economy, and with nobody to regulate or monitor the exchanges, the recent inflation can all be some part of manipulative collusion.<p>WoW Gold and Team Fortress 2 Apple Earbuds seem to have a more stable and trustworthy currency than Bitcoin.<p>Yes, I wish I could predict the spike and have cashed out, but I'm not losing sleep over avoiding an investment that doesn't feel right in the least.

I wonder what Tucker will say Bitcoin is teaching us if it falls to $40.<p>Bitcoin is very interesting and agree with Ezra Klein's piece on it. However, the importance of Bitcoin is not in its exchange rate to other currencies, but in all its other unique properties.<p>Tucker puts far too much weight on what is quite likely a speculative bubble, which will be to the ultimate detriment of Bitcoin's long-term future.

Inflation is a tax on held currency. You may think a tax on wealth is good or bad, but from a policy position I don't see a compelling reason to argue about it in any other terms.<p>This means that inflation encourages people to hold their wealth in assets other than currency.<p>Considering that wealth aggregates at the top, the effect of inflation is greatest on the wealthiest.<p>This also means that if you have $100 worth of assets held in a currency that is expected to depreciate and $100 worth of assets in a currency that is expected to appreciate, then you will spend the former rather than the latter.<p>Hence the argument that deflationary currencies are worse than inflationary currencies as a unit of exchange.

This article is quite opinionated, but one thing I liked:<p><i>This brings us to another lesson that Bitcoin has taught us. Money is like any other good in society in that it can be produced and managed entirely by the free market. This is the reverse of what scholarly opinion has said for more than 100 years.</i>

Is anyone else as annoyed at the moralizing tone of this article?<p>"With paper money, governments and central banks are in a position to punish holding money. Because it can be created without limit, discipline vanishes. Individuals, families, businesses, and government can ramp up spending without limit and avoid the consequences of their behavior."<p>Punishing the "sinners" for not keeping their currency and spending it in order to support the economy as a whole seems to be a primary goal of those that want commodity currency.<p>"You can try this experiment at home. Let’s say you have a problem teenager who lives like everyone else, throwing around cash and seeing no point whatsoever in saving money. Send that kid a Bitcoin and see what happens, even without hectoring instructions."<p>Yes, give them a Bitcoin and they'll be saved, praise our lord and savior Bitcoin! Unless that teenager wants a skateboard today, not two skateboards in 2 months. Maybe they want to buy a meal b/c they are hungry?<p>Finally don't reference the Gilded Age as a model of good monetary policy, two major depressions and a thin veneer of success for a wealthy minority shouldn't be the zenith of monetary policy.

It seems that the author thinks Bitcoin is going to steadily appreciate indefinitely, which is obviously not the case. Give a kid a BC at $140 and you'll have a furious kid when it crashes to $15.<p>Somewhat off-topic: isn't BC just digital gold? Is there any reason to think of it any differently?

Ridiculous. Bitcoin - as cool as it is and as much as I admire the cleverness of the system - is a FAILED currency. What it MIGHT turn out to be is a store of value once the speculation cools - but that is still a few years away.<p>If a currency encourages saving and discourages spending, it brings the economy to a screeching halt. This is why Bitcoin fails as a currency. It is also the reason why it will never be accepted commonly as a currency.<p>However, because the supply will be (artificially) limited in time as all Bitcoins are mined, there is a case to be made that it might emerge like gold as a decentralized store of value. It's anonymous and infinitely portable.<p>So time will tell.

Yes please Ignore the deflationary spiral that its currently undergoing. It amazes me that people are buying into a system which actively discourages people from using it as a way to exchange good and services.

What happens when we don't need to exchange BTC for another currency anymore? Or will BTC be forever inherently dependant on the existence of a government controlled currency? How would we price things in BTC like groceries or salaries? Would that be always changing because the value of BTC would be forever going up? I'm probably talking beyond our lifetime here..

i just wished i'd hit the buy button when they were $20. I didn't believe in them then, I don't believe in them now, but I sure as hell believe I would have cashed in some nice short term earnings from the bubble :)

Mr Tucker is truly a treasure. If anyone is not familiar with him or the ideas, check out mises.org

Well said!