The General Economics Thread

Much like the stock market, but instead of being gatekept by the bourgeois,its instead being gatekept by first adopters (and the bourgeois)

It's basically keeping your car running 24/7 to produce solved sudokus that you can trade for heroin.

Heroin and other unsavory merchandise.

To be fair to bitcoin and other cryptocurrencies (I can't believe I'm saying that), their proponents are not wrong that all money is a function of shared belief, so if they generate enough shared belief in cryptos, they can be viable currencies. The same is true of rocks or leaves (well, aside from the supply issue, but bear with me).

The fundamental problem with all cryptos is the lack of central banking to provide necessary fiscal and monetary policy support. This places them at risk of runs and other distortions that seriously harm economies. With the inability to create new currency on demand, the only way to get more is to take it from people who have it, and since you can't "steal" digital code, this will instead cement the haves and the have-nots in a way not seen since the feudal era.

If you imagine that cryptos will create some sort of egalitarian system, you should be aware that the "haves" are already buying into it to guarantee their place in the new order should it arise. There's no escaping inequality by making your own money unless you lock people out of buying into it, which defeats the entire purpose.

The problem with bitcoin in particular is that it's deflationary and so there's no reason for anyone to ever spend it. This makes it a (potentially) good investment but a terrible currency.

Edited by Fighteer on Feb 25th 2021 at 7:11:04 AM

Well, deflationary actually.

Another problem with these cryptocurrencies is that, unlike gold which is used in electronics or as jewelry (where its corrosion resistance is useful), their value is entirely psychological.

And tulips at least can be used as decoration for your table or something.

I fixed my error. Sorry!

The industrial use of gold actually takes away from its value as currency. You can't trade a gold-plated circuit board for food. If you melt it down for the gold, you no longer have a functioning circuit board. The two uses are at complete odds with one another.

An effective currency should not have a use as something other than currency (besides things that are explicitly meant to be stores of value, like jewelry).

It should also be divisible, which is why diamonds are terrible as currency. They also have industrial use, so that's two strikes.

Edited by Fighteer on Feb 25th 2021 at 7:16:55 AM

Unexpected news

GameStop shares surge more than 100%.

Seems it's not over after all.

Here We Go Again!

Edited by Fighteer on Feb 25th 2021 at 7:44:14 AM

This one might actually be based on something real, given it happened a day after the CFO said he would resign next month.

Note that it's still "only" at $91, a far cry from when it peaked at $350.

Edited by M84 on Feb 25th 2021 at 9:09:17 PM

The Wall Street Journal has published an editorial calling out people who insult short sellers. (The original article is embedded in the tweet and is paywalled, so I'm not linking directly.)

Seriously, how blind do you have to be to post something like this? Oh, no, the poor maligned short sellers. They get rich by destroying companies, but we can't stoop to insults.

Edited by Fighteer on Feb 25th 2021 at 9:10:20 AM

Hmm, I wonder why it might feel like a political fight...

They still believe that what is good for business is good for America. They can't see beyond that.

It's the Wall Street Journal - financial news outlets have consistently sided with the rich against the little guy.

One of the few excpetions I've seen during the height of the GameStop situation was Yahoo Finance, which actually went and interviewed people who had some insight on the retail traders' side instead of just demonising them all as irresponsible gamblers and potential fascists.

Edited by DrunkenNordmann on Feb 25th 2021 at 11:11:11 AM

You can’t steal it in the traditional pure-violence way, but plenty of people have been scammed or threatened out of their crypto. Law enforcement has seized crypto from criminal groups, so it clearly is possible to seize it by some level of force.

Right, but those aren't actions available to the average person. Nobody walks up to another person and mugs them for their bitcoin wallet.

Historically, one way of correcting inequality in the distribution of hard currency has always been to grab the spears or the rifles and take it by force. Governments in turn exercise taxation authority with the implied threat of violence. With fiat currency, governments can control the money supply directly.

This is revealing because one of the overt motivations behind cryptocurrency is avoidance of taxation: "Get the government's greedy hands off my money." Since taxation is the primary peaceful way of redistributing wealth, it becomes clear that this is also something that crypto proponents object to. Far from democratizing money, bitcoin and its brethren are explicitly designed to preserve the privilege of wealth.

If you think you're a "have-not" under fiat currency, just wait until the crypto era. If you didn't buy in at the start, you're fuuuuucked.

Of course, with gold there's a physical substance that will always be around even if the lights go out and the trains stop running. After civilization collapses, a passcode to a digital wallet will do you a fat lot of good on your phone that can't be charged because there's no electricity.

Edited by Fighteer on Feb 26th 2021 at 7:26:17 AM

Biden admin plans executive order to address chip-shortage woes: Semiconductor demand isn't going to drop, but supply has proven a problem.

I can't fathom cryptocurrency replacing our current conception of money within our generation.

Short of, you know. Some unmitigated ecological disaster that herds humanity into arcologies or something.

Wont happen ever, no matter how many generations go by. Crypto doesn't offer enough benefits compared to the costs.

Unmitigated ecological disaster made even worse by those cryptocurrencies.

I wouldn't want to put words on any person who advocates the idea that cryptocurrency will replace everything else. But if there was one such person here I'd just like some clarification on these ideas, I guess.

All I can say is that all it takes is one strong economical block (the USA, the EU), to put the foot down on cryptocurrencies and the party is over for everyone involved.

As @ Fighteer said, bitcoin and its ilk allow the rich to avoid the taxation they have to pay due to the fact that no cryptocurrency is tied to a central bank, and therefore enters into a loophole because that makes it untaxable by anyone.

So, if the USA were to outlaw bitcoin and/or explicitly set a ratio exchange of, say 1 bitcoin = 10^(-10) US$, there's nothing that the owners of said cryptocurrency can do precisely because there's no central bank to give bitcoin some sort of objective value.

Although I have my misgiving about fiat currency being too subjective to my taste, it at least retains some objective component by being based on the potential of each country's economy, cryptocurrencies are purely subjective by comparison.

I'd argue that exchange ratio is still to high. And would instead impost one of 1 crypto=$1 no matter what type of crypto it is. Maybe even 1c if I'm feeling really pissed at them.

Finally, my dogecoin investments will have paid off.

I was actually making a ratio of 1 bitcoin = 0.000000001 US$, the point being to hammer how truly useless bitcoin can be if the USA wanted to put it in its place.

Edited by raziel365 on Feb 26th 2021 at 8:07:28 AM