The General Economics Thread

First off, lets agree that Bitcoin itself is basically a pyramid scheme. Early investors make a bunch, later investors take the risk. It's deliberately designed to become more scarce as time goes by, so it can't work as a general currency.

Now, cryptocurrency in general could be designed differently. The advantages are that it's digital, and therefore easy to use online. Because they are encrypted (obviously) they potentially offer greater security and privacy with your transactions (sellers no longer need to know who you are to trust your credit). Unfortunately, there are a number of disadvantages as well.

The biggest is scalability. Even if they are not deliberately designed that way, any crypto can only expand in supply at a fixed rate. This means that no one is in a position to adjust the money supply in order to resolve recessions or other economic crises. Right now the supply of electronic credit through banks or other financial institutions is effectively infinite. Crypto cant meet this need.

Another disadvantage is a direct outcome of the first. Because crypto cant scale fast enough, the infrastructure to handle crypto transactions also wont scale up to the level needed to compete with, say, credit card transactions. Why would online retailers invest in a transactional technology that only a fraction of their customers will ever use? Also, one that you can't use as a marketing tool to bring more customers into your business? (That's the real reason Amazon and other retailers offer special credit cards to their customers).

Another disadvantage is that, although crypto's are of course encrypted, that doesn't mean they are immune to cyber crime. Wallets can be hacked into, the same way they steal other forms of online identity, and unlike a credit card or bank account, once your wallet is cleaned out, your money is lost for good.

Another outcome of the fact that crypto can only be created at a fixed rate is volatility in it's worth. Since central banks cannot adjust the supply of crypto in response to economic or market conditions, crypto currencies tend to suffer from extreme changes in their value. There can actually be a bubble in crypto, which is virtually impossible with the dollar. That makes it hard to know what your wallet is going to be worth in, say, three years from now, and if all your savings were tied up in crypto, how would you make long term financial plans? It's like putting all your savings into gold or diamonds (no—that isn't a good idea!).

The bottom line is that buying crypto is an investment risk, and unlike investing in stocks or bonds, there are virtually no government regulations protecting the public when buying cryptocurrencies.

Dabble in it if you like, but I do not recommend tying up a lot of your savings into it.

It follows the same principle as any investment: Don't put money into it that you can't afford to lose. I also find it telling that cryptos are valued in dollars. That should speak volumes about the true currency.

Oh no, some people very[1] much[2] do[3].

Those are mainly premeditated crimes that involve an exchange of bitcoin under fraudulent pretenses. That's not something accessible to the average person on the street.

Then again, if all currency is digital, it might be possible to mug someone and force them to transfer currency from their digital wallet to yours. It's an interesting idea.

Reminds me of stories I read about when Venezuela was going through its economic crisis, people would be threatened at gunpoint to withdraw money from their bank accounts using their debit cards. I can imagine something similar happening with crypto.

"Then again, if all currency is digital, it might be possible to mug someone and force them to transfer currency from their digital wallet to yours. It's an interesting idea.'

And in the case of encrypted currency, there would be no way to trace the lost money.

That's why a lot of ransomware operators want to be paid in bitcoin. There's no getting it back.

So here's a Wisecrack vid on billionaires in the USA and how they got their start. tl:dw; it's something that started way back when government started subsidizing railroads. That and the free market has never really been a thing - it always involved the government one way or another. The rich, then and now, aren't above begging for government handouts and support to maintain their fortunes.

Wisecrack - What Went Wrong with Billionaires:

The vid also points at the Gamestop thing and how it differs from the worker revolts during the Gilded Age. Rather than trying to change the rules of the game, a lot of people nowadays are more interested in getting a piece of the pie.

Edited by M84 on Mar 1st 2021 at 4:02:12 AM

I wanted to start a discussion on the Collectibles market. Specially stuff like anime figurines, Limited Special Collector's Ultimate Edition and other products with a Limited Run. I ask because because I am aware that they seem to be targeted towards Rich or moneyed people (such as Otaku) to exploit their FOMO, but I want to ask how they managed to turn a profit off of that despite and because of the short supply?

Put simply I want to ask about the economics of FOMO.

When you make a product, and calculate the profit you intend to make from it, you factor in two things: all related costs (taxes, operational, manufacture) and then deduce that from the income (what price it is sold at, multiplied by amount of units sold).

"Limited Edition" items are twofold in its profits. One is the direct incoming which is the result of the previous formula, the second is the marketing one they get from a limited amount of pople giving free clout ot their brand by promoting this cool thing they got. The second one is much, much harder to calculate, if not impossible.

but for straightforward profits of just the sale of deluxe items, you just factor in the production costs and then estbalish a price based on units to make it a somewhat limited item (or you just, you know. Lie about it being "limited edition") and you can easily define your profit for this situation before the product is off the shelves completely.

issues accrue if they dont sell whatsoever of course. But hte idea of this strategy is to specify an expected amount beforehand.

For luxury items, the price of the item itself also serves at least partially as its own worth because of the status symbolism owning such a high-priced item has. This does violate normal supply and demand laws since lowering the price ends up lowering the demand, but we're already in abnormal territory because we're talking specifically about goods marketed to a specific buyer group with a particular behavioral mindset (the FOMO peeps).

In this case your market has a limited demand pool consisting of people who are interested in novelty collectibles. These people also tend to have specific interest categories, such as Marvel films or He-Man cartoons.

The collectibles themselves have a cost to produce, so they need to turn a profit, and they have no inherent value other than as lumps of plastic. A toaster has inherent value in that it toasts things. A light bulb has inherent value in that it provides light. A Funkopop has inherent value only in taking up shelf space.

As with any novelty item, they must create their own demand by appealing to people with specific interests and by being perceived as scarce and thus immediately desirable. If you don't get one, you might never get one.

Therefore selling them is a balancing act. If you make too many, you saturate your market because they are perceived as not having any value and you risk not selling them all or making no profit. So you are incentivized to produce less than the total anticipated demand so that you can sell them for more... or withhold supply so you can sell them in waves.

Edited by Fighteer on Mar 3rd 2021 at 4:38:44 AM

Collectibles can even be sold at a loss if they are expected to drive up sales beyond what the cost of the collectibles are.

You mean if they are used as part of the marketing of a work? Yes, that's true, but you run additional risk if the work itself turns out to be unprofitable.

Usually, collectibles are made by third parties who expect to make money from them regardless of the success of the licensing property. Of course, history gives us plenty of examples of botched merchandising promotions.

Edited by Fighteer on Mar 3rd 2021 at 4:55:27 AM

Tesla share price plunge knocks $267bn off market value - Decline wipes billions off Elon Musk’s fortune as investors fear firm is vastly overvalued.

a karmic responce to buying in crypto

I'm sure he'll be weeping into his swimming pool full of money.

It had to happen eventually, Tesla's shares have been hilariously inflated for a while.

Gee, it's almost as if Musk never had any of that money.

Yep, Fighteer was right. People can still enjoy the karma, though.

So would this count as a Tesla bubble of sorts?

Edited by Redmess on Mar 6th 2021 at 1:47:56 PM

Tesla's fall accompanied the fall of many other growth stocks during the same period, and while the woes of one company seem a little too specific for a General Economics thread, there seems to be a sudden lack of confidence in markets without a clear cause.

Tesla will be fine; its share price doesn't affect its operations. However, there are a lot of retail investors losing money right now.

I find it genuinely hard to believe that the act of buying some bitcoin would have such a huge effect on the stock price; nothing changed about the company's operations, growth, or future sales projections.

Edited by Fighteer on Mar 6th 2021 at 8:21:33 AM

Could it have something to do with that minimum wage bill not passing?

That probably helped the markets if anything, because more ways to screw over workers is good for them.

Edited by RainehDaze on Mar 6th 2021 at 1:36:16 PM

Yes, but it could also create an atmosphere of Democrats not being able to get anything done, which I assume would not be good for markets.

I'm pretty sure the drop started before the minimum wage effort ended.