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A whole bunch of questions...

Discussion in 'General Discussion' started by SapphireSpire, Mar 15, 2016.

  1. SapphireSpire

    SapphireSpire New Member

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    I was impressed with Bitcoin when I first heard about it. I was going to buy some until I realized that most of it's characteristics make it unsustainable. It has a limited supply, an unlimited blockchain size, a declining rate of production, and no means of recovering lost coins or preventing hoarding which is necessary when the supply is limited. It may be useful now but in the long run the scarcity will kill it.

    Dash sound amazing but the current incarnation of Dash is also unsustainable. Doesn't anybody realize why fiat is inflationary? Because that is what's required to support savings. The mere act of saving money removes it from circulation and inflation is necessary to replace it in order to maintain the velocity and liquidity of the market. Inflation also increases the value of business inventory. Deflation reduces the value of business inventory which is one of the reasons merchants are reluctant to accept deflationary cryptos.

    To be sustainable, a crypto needs to have the opposite set of characteristics of Bitcoin- an unlimited self-regulating supply, a limited blockchain size, a steady rate production, and a means for recovering lost coins.

    It also needs a way to manage inflation and deflation without effecting the values of accounts. Inflation is what should happen when the supply becomes concentrated in a small percentage of accounts. Deflation is what should happen when the supply becomes evenly distributed among the majority of accounts. One way to do this is to introduce a new variant of the same coin with a different color association and exchange rate. This would not be a hard fork because it's the same coin. An exchange rate less than one to one, such as two to one, would decrease the supply thereby facilitating deflation while an exchange rate greater than one to one, such as one to two, would increase the supply thereby facilitating inflation. As long as merchants understand the color and exchange rate, the prices of goods should change accordingly and the value of accounts will be preserved.
     
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  2. daf

    daf Active Member

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    Interesting point of view. I wonder what others (like Toknormal) think about it.
     
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  3. Sapereaude

    Sapereaude Well-known Member
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    Some quick points:

    What kind of scenario are you envisioning that scarcity will kill Dash? Since Scarcity is a function of supply/demand and I cant imagine why scarcity would cause less demand or a lower price.

    As for inflation, yes controlled inflation is generally a good thing and we do have controlled inflation up to a certain cap, but reaching that cap will take years. When that happens perhaps we will revisit the issue.

    In your last paragraph your essentially advocating that a cryptocurrency should act similar to that of central bank and it is not possible to inflate or deflate the value of a currency with out affecting its value relative to the real world. Sure the number in the account will remain the same, but those coins will be able to buy more or less lets say chicken nuggets.

    It also seems a very arbitrary measure that we increase coin supply when the supply becomes evenly distributed among the majority of accounts? The coins could be spread equally among all accounts, but a small portion of people could own a majority of the accounts.

    TBH you need to justify/clarify alot more of what you wrote.
     
    #3 Sapereaude, Mar 15, 2016
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  4. SnowHater

    SnowHater Active Member

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    Maybe better solution would be to create additional token based on DASH blockchain which is pegged to USD (or even some group of commodities) to be more stable for merchants. Take NuBits and NuShares for example. I use NuBits quite often actually.
     
    #4 SnowHater, Mar 15, 2016
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  5. TaoOfSatoshi

    TaoOfSatoshi Grizzled Member

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    Ever tried to split a dollar 10,000,000 ways?

    It will be a looong time before Dash has a liquidity problem based on what you said.
     
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  6. Sapereaude

    Sapereaude Well-known Member
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    A solution to what exactly?
     
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  7. SnowHater

    SnowHater Active Member

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    To get real money which price in relation to goods is pretty stable. Why would someone you use Facebook shares to buy groceries?

    SapphireSpire, you can read my doc from 2014 about IMHO ideal cryptocurrency: https://docs.google.com/document/d/1mLuPVjEHAW9AsS5BKZMuCfyfuyKdGFD6TUapTY7Qggg/edit

    The main problem in it is a sybil attack though. Now my views changed. I think that future of mankind is not only in new money but in new organisations which use both new decentralized money and new decentralized reputation system.
     
    #7 SnowHater, Mar 15, 2016
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  8. Sapereaude

    Sapereaude Well-known Member
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    Economically I'm not sure why that is desirable or even possible. Historically speaking no "money" has ever remained stable in relation to goods over the long run, hell they had to devalue the sestertii and that was two thousand years ago.
     
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  9. stan.distortion

    stan.distortion Active Member

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    Firstly, welcome to Dash :) Nice post and some points worth savouring so just one for now ;D


    Ok, what's the worlds longest standing currency? Probably animal furs or something but gold is the one we recognise so that's where crypto built it's foundations, might as well start off with something proven. But why is gold so resilient and long standing as a currency? Not for anything as simple as the goldbugs would have you believe, just say "we is goin' back to the gold standard" and after a few decades you'll have a class divide that makes today look like communism, easy to keep something like that going perpetually but it usually 'aint nice for the general population.

    What does that have to do with the rate of inflation? Bare with me, I'm getting to it. Gold has worked extremely successfully as a currency but not in a general, anarchistic way, it's worked sustainably and relatively fairly when the rich are obliged to give a portion of their wealth to the poor, Zakat under Islam is the obvious example but most long standing examples needed something similar to avoid an ever widening gap between the rich and poor. Now, under capitalism we sneer at such heathen practices... ok, maybe that's a bit extreme but try to implement something as direct as that into economics and you 'aint gona' be popular so you have to be sneaky about it... inflation, the same number on the bottom line but worth less and less with every passing year.

    However, there's a serious flaw in both of those but that'll have to wait, gtg but just a hint, the distinction between real and artificial value is likely to be a major talking point before too long if the economic shitstorm we're heading for can't be kicked a bit further down the road ;)
     
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  10. SnowHater

    SnowHater Active Member

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    I think it is the more possible the more market capitalization this currency has. If DASH has market cap more than USD then it will be more convenient money with less volatility. Untill this moment some pegged token could be useful specially for merchants.
     
    #10 SnowHater, Mar 15, 2016
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  11. raganius

    raganius cryptoPag.com
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    Yes, I believe OP might have not taken into consideration the huge divisibility property of the BTC based cryptocurrencies. Such divisibility allows that inflation be completely dispensed in order to create liquidity, which is naturally done by means of free market pricing. A much more sustainable solution, as it seems, if compared to the artificial market manipulation of the "managed inflation".

    DASH's scarcity in no way harms its velocity. Actually, complemented by such high divisibility rate, money velocity will always be improved. In reality, velocity will necessarily increase with "utility". And utility, here, means more adoption, especially merchants adoption, because, if DASH's only use is hoarding it on Masternodes, it seems obvious that velocity will decrease. But if DASH really starts acting like CASH, if there are enought merchants, spending DASH will be encouraged more than hoarding it, thus increasing more and more velocity.

    Inflation will improve velocity, because no one wants to hold an asset that is being corroded by inflation. But I don't think this is healthy, IMHO.

    That's my point of view, anyway: DASH is still in the right path. We must only avoid losing this path with mirabolant immense steps... let's do it slow and steady.
     
    #11 raganius, Mar 15, 2016
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  12. SnowHater

    SnowHater Active Member

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    Agreed.

    But merchants usually hate volatility. That's why some pegged to USD token could be useful. In case this is offtopic, a discussion about it took place here.
     
    #12 SnowHater, Mar 15, 2016
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  13. raganius

    raganius cryptoPag.com
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    It is certainly possible to create a "sidemarket" (similarly to what bitshares, nxt, or nem are doing) and, in this market, it may be possible to try to create functional tokens that are "pegged" to usd, eur, jpy, or maybe pegged to gold, silver, etc. But: how safe this pegging is? I wonder if, in the long term, under strong market forces, the token will truly maintain its parity.

    Anyway, if there is a "stable token" pegged to no matter what other asset, it will no longer be DASH, but something else (maybe DASHusd token, but, still, that's not DASH circulating, but this alien token). It may be developed? Yes, if really needed, and if there's someone willing to work on it. But it wil not be DASH: it will be some USD pegged token convertible to DASH, in a sidechain, or in a completely independent altcoin... (actually, no need to create it, because with shapeshift Tether, for instance, is already convertible to DASH... so, yet another new token will solve nothing, IMO).
     
  14. TroyDASH

    TroyDASH Well-known Member

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    I think the debate over what the appropriate inflation/deflation is, or governance of the total coin supply, is certainly a valid point of discussion. However, "scarcity" is not an issue for DASH or really any crypto currency due to the divisibility of the coins. Even if there were only 1000 total coins in circulation that is still a gazillion currency units to work with.
     
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  15. Naruto

    Naruto Member

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    A very good post. And I think what you say is worth to discuss

    1. Fiat is inflationary not because it used to support saving but it is a debt base money system. (This is what I think)
    -For me I would say DASH is inflationary at the current state. During I write this post DASH money supply is 6,296,194 and it will keep inflate at a predictable rate. And if you think unlimited money supply is the right answer, there is many other alternative in the market you can find. So DASH user know what the inflation rate is and will be and they are OK with that.

    2. It seems you think saving is bad for the economy as it reduce the velocity and inflation is the right things to do to correct it.
    -I would have a different opinion about that. We are living in a world with limited resources. In order to have a better environment and living standard for long term, saving should be encourage. And people who save (whether money or resources) should get reward. This is the different ideology form yours. What fiat does is (by printing more and more currency every years) it promote people to consume energy and resources that is unnecessary and faster than the rate Earth can renew. It would have long term effect and our next generation have to bear the cost of that while we are currently enjoy all the benefit. It is basically unethical. So .. what is bad for the economy ?? If there is still economy in the next 20 years!

    3.I don't think limit block size it a wise solution. We just need to keep the growth match the growth of technology.
    -You cannot assume the internet speed will be just like it is today. Just see the video here and you will know why


    Anyway your opinion and feedback is welcome

     
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  16. TanteStefana

    TanteStefana Grizzled Member
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    "an unlimited self-regulating supply" This implies one needs to manage market foces: IE manipulate market forces, which also means manage who earns and who pays. I think maybe not. In my opinion, Crypto Currencies provide a service, if the service is good, the demand is high, and those who support the currency see a value increase in their coins due to natural market forces.

    "a steady rate production" This is only one way to bring coins into the system. However, lowering the rate over time creates more scarcity which incentivizes early adoption and continued growing valuation (assuming the product remains desirable due to being functional and useful). This is how crypto currencies hold a store of value. Some do it better than others. Some will die because they don't offer anything else, even if they taper off production. Without a store of value, people will not want to accept the currency due to risk.

    "a limited blockchain size" Well, yes, I think there is an issue with Blockchain size, but must it be limited? There is something to be said about having a clear, verifiable blockchain since inception. With Moore's Law pretty much keeping steady since the dawn of computers, we can assume the blocksize will not grow larger than capacity to store it, however it will be a bit much to expect casual users to store big clunky files like this. That's why we have the Masternode Network. Masternodes are paid (as well as miners) to hold the blockchain as well as perform other work. With the rise in value of Dash due to that limited emissions and hopefully growing user base, we can require minimum computing power and storage capacity of our Masternodes so size isn't an issue. However, if it should become a physical limitation, there are many ways to handle this, such as sharding the blockchain or truncating it, etc...

    "a means for recovering lost coins" Even banks can't recover stolen coins (and they're the absolute worst at keeping funds from being stolen!" What you have with banks is insurance. Crypto-currency gives you the choice to manage that risk yourself (which a person can do very well on their own if they wanted to) Crypto currency allows a person to protect their privacy, and personal information (ID theft isn't possible if your ID isn't in someone's system). I'm sure there will be companies that spring up that will manage your coins for you, for a fee, and insure your holdings some day. I'm also sure I won't be using them.

    "needs a way to manage inflation and deflation without effecting the values of accounts." Why? That just means you want someone to control the marketplace. It's not like there will not be enough to spread around. The market place will determine which cryptos are worth anything, and those that provide needed/wanted services will be used the most, and will gain value because of that. All together, they will become an ecosystem that will be self regulating (in terms of number and value). That's why it almost doesn't matter which set of rules a crypto is established with when it's created, it's the fact that the rules of emissions will always be the same that matters. No manipulation is possible, thus the market establishes value. This is highly volatile now, but I'll bet it will be far more steady over time - because the market will determine value, not a government or bank pulling strings, and thus these bubble and crashes to the economy will become a thing of the past.

    "Inflation is what should happen when the supply becomes concentrated in a small percentage of accounts. Deflation is what should happen when the supply becomes evenly distributed among the majority of accounts." I don't know where you got those definitions. Inflation is when the issuing "authority" starts printing more bank notes, thus watering down the real buying power value of the bank note. It's a time tested (talking thousands of years) way of taxing the people. Rome did it several times by removing the precious metal in their currency thus they could produce more currency. Check out what the Wiemar Republic did in the early 1920's to pay for the treaty of Versailles. That was nuts. My grandmother told me about how they would get their money from their husband's work place at the end of the week in a wheelbarrow, then run to the store to buy food before it devaluated even more.

    Deflation, on the other hand, is when the supply of funds is limited. The biggest fear in modern economics is that deflation means nobody will spend their money because if they just hold on to it, they will have more money. In actuality, people will do this, up until the things they want are more valuable to them than the currency. So maybe they'll hold off on buying a new car for a while but they'll keep buying food and pay for electricity, etc... because they need these items. With the right balance, mass consumerism will undoubtedly fall, but certainly the energy that goes into that can once again be put into quality consumerism.

    Again, Deflation won't be a problem because 1. the world will require time to convert to crypto-currency and may never entirely convert because some people like to have a big brother watch over them. This is fine, it's a choice. And 2. There are many crypto currencies to choose from, so they are all absorbing the influx and change to this new ecosystem. Some more so than others, and again, that's the marketplace.

    The weirdest part about this whole thing will be loans. Why would anyone make a loan to another for crypto that is already gaining value at a high interest rate? The payback would be too difficult. And of course, without loans, people can't start businesses and produce (the real value of anything in this world). This is only an issue if crypto-currencies never find their balance, and real value never settles down but continues to grow. But we can assume that will mostly be the case for the successful currencies for now, so what can be done? This is an extremely exciting section of crypto that people have been working on. Bitshares has a system where they can issue tokens pegged to the USD, as well as Nushares/Nubits and there is currently a proposal in the Dash budget system for a whole other way of doing this (encouraging funding for businesses) People are amazing with thinking outside the box, and I'm especially excited about the experiment project proposal "Proof of labor" and sincerely hope they can get the votes to work on it. I think it could be an amazing experiment but also bring a ton of media interest to Dash as it would be a very interesting story :) - hey, I should write that as an incentive to work on it :)

    Anyway, when businesses build something, they produce value, that value at that level is what will create the economy, and there does indeed need to be a level of crypto that feeds producers and increases value at this level
     
    #16 TanteStefana, Mar 15, 2016
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  17. SnowHater

    SnowHater Active Member

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    IMHO, It is not about scarcity rather then about possibility to manipulate the prices while you have 6 million of DASH, and the rest have 1000 DASH. When you control most of the coins you control supply and demand easily. What is difference from a central bank then?
     
  18. SnowHater

    SnowHater Active Member

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    It depends on what blockchain will be host this token, and in what currency fees will be forfeited. If DashUSD is hosted on DASH blockchain and transaction fees is paid in DASH then the circulation is going inside our blockchain (like tokens on Ethereum blockchain). For merchants this is useful because there is no need for them to transfer DashUSD in fiat as soon as possible after each bargain (being in fear of volatility). Only when they need to cash in or cash out. Economy on fees can be huge.
     
  19. raganius

    raganius cryptoPag.com
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    No matter what one does, there is never such thing as an equally distributed asset/resource. Even if a powerful person forces equal distribution of money to each person in a kingdom, still, with time some people will waste money, and some people will earn money, and the concentration will reign.

    Infinite issuing of money does not solve it... and to be honest, there is nothing to be solved here, because that is not a real problem.

    edit:
    As I said above, my personal opinion is that I don't think this is viable.
     
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  20. TanteStefana

    TanteStefana Grizzled Member
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    SnowHater I think the difference is that there will be a point where a holder's grip will loosen. Eventually, they will want to spend those funds. There is always a price where it can't be resisted. Still, if someone had bought more than otoh, I think we would have seen it. In fact we were watching otoh accumulate before we knew who it was. He eventually outted himself. But my point is, he was the biggest accumulator, and he had at the top, around 600,000 Dash, 1/10 of tooday's supply. He has since sold them to people, and manages a lot of their funds for them (I think these are his friends) so he doesn't own them anymore. And I think it's closer to 400,000 now. So even he let them go. A free market will naturally spread the wealth.
     
  21. stan.distortion

    stan.distortion Active Member

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    Right, where'd I get to with that meandering brainfart? Ah yes, the recirculatory function in sustainable gold based systems and the use of inflation to perform the same role in fiat systems. Right, miss that out and you get an ever increasing accumulation of wealth, "the rich get richer and the poor get poorer" is an unfortunate inevitability and the more scarce the necessities of life, the worse it gets. When there's abundance and even the poorest are able to live with even a slight surplus it's not much of an issue but when there's not enough to go around... not nice times.

    How does Bitcoin fix that problem? Simple answer, its doesn't and neither does Dash and for what it's worth neither do any of the fiat systems we have today, taken individually they all reach a point of failure in a relatively short time. The key point is right there though, "taken individually" and that's where Bitcoin, Dash and all the other multitude of cryptos kick fiat right into the gutter, no one is forcing you to use them. It's all to easy to miss the significance of that point, one of the key properties of money is a store of value but enforce the use of a single kind and it quickly overwhelms the value it's intended to represent, it pools together to the point where there's more value stored in the form of money than real things to spend it on, 99.999% of the gold sits in vaults while the entire economy struggles to get by with the remaining 0.001%.

    Fiat is only very slightly better in that regard, inflation magics some of that value out of the vaults but only a very little, you still get so much pooled together that there's more stored value than real but at least some of it is coming back into circulation. In short, a cludge. How to fix it? One way is to do away with all artificial forms of value but that's only barely become practical since the communications revolution and the chances of it actually happening are so slim they're not worth considering, crypto will move some way in that direction with things along the lines of Etherium and Bitshares enabling global markets to exist with little or no need for a monetary medium but there will always be the deranged willing to accept things like tons of wheat to be grown in 100 years time as value today, that's as inevitable as the poor getting poorer :/

    Cryptos alternative is to put so damn many forms of exchange out there that their value is placed purely on their merits and that plays out rather well when inefficiencies of communication are removed. When you have to go to the bank during business hours to exchange your collapsing Yellenbucks for booming Legardbucks then you're going to loose out to everyone in the que in front of you but when you can do it instantly, globally, automatically and in a multitude of directions the individual "store of value" aspect becomes insignificant and you can use money for it's real purpose, moving value from one market to another and for that you chose the best kind for the purpose, for example the one with the fastest transactions, the best privacy, the most innovation and the best governance ;)
     
    #21 stan.distortion, Mar 15, 2016
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  22. xdashguy

    xdashguy Member

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    I agreed. When I was in the bitcoin scene I also made these arguments. The truth is you only need to look at history and even modern day. There is NO widely used currency that is not inflating. Even gold is still inflating every year. I think pegging the yearly mining reward to 3% of total dash supply would be a good thing.

    The truth is, these coins will adopt this method regardless. It is unlikely they will generate enough volume / fees to maintain security, so as the mining reward drops they will be in a catch-22. The only way out will be to guarantee so some "inflation rate" which can be used to maintain the security of the network.

    Regarding dash in particular, how will the decentralized governance work when there are no longer any mining reward coins to fund projects? Fee income could be very unreliable and volatile, so it is not a reliable source of dash units to fix a budget.
     
  23. TroyDASH

    TroyDASH Well-known Member

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    If the system scales way in the future to millions of TX per day, the average TX fee would not have to be very high to allow for large budgets. And, even though mining reward decreases over time in terms of coins, that does not mean a decrease in value. If the price of DASH increases 100x due to adoption and deflation then a few block halvings won't really be a problem.
     
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  24. xdashguy

    xdashguy Member

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    Yes, IF it gets millions of TX per day, then perhaps. However, that is a loooong way off. Based on the current usage of coins it does not seem like the future. The coins are being used as a settlement layer and transactions are either not occuring (being used as a store of value) or they are occurring off-chain.

    Even if Dash solves the scalability issue, I am not sure consumers will use it that way. Most consumers will probably be using Dash in some type of 3rd party wallet (think Google Wallet, Paypal, etc, which enables dash payments), so most transactions will occur off-chain.

    But you are right, if Dash reaches a future where it actually does millions of transactions per day, then it might be able to continue to fund security, budgeting, etc, without the need for inflating. If it ends up being used mostly as a settlement layer with the option to use it like cash though, then it will likely need to implement 3% per year inflation target to fund itself.
     
  25. Sapereaude

    Sapereaude Well-known Member
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    For small time merchants that have orders in one currency and expenses in another, yes. Bigger companies on the other hand simply hedge, buy options etc and companies have other options like getting their manufacturer to accept part of the payment in the currency being sold in.

    It's just another cost of business for companies that are worth lets say 10million, 10 million being not that big and there are thousands on thousands of those size business in every country of the world.
     
    #25 Sapereaude, Mar 20, 2016
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  26. Sapereaude

    Sapereaude Well-known Member
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    The problem with gold-standard based systems is the fact they have no money creation, which severely impedes the ability of the economy to grow. If you keep all else constant the bank creating the money for the loan should be cancelled out by the future earnings that loan creates. The more difficult you make it t borrow money the slower the economy grows. So for an example case lets say a bearded guy gets a loan to buy an expresso machine, organic sourced cruelty free coffee and and then charges a pretentious amounts for it. Now he can pay back the "created money" and from the income stream he "created" out of shitty garage and some stools.

    If the bank couldn't create money then it would be alot (read all the gold in the world is only worth 7 Trillion and that wouldn't cover USA let alone the rest of the planet) harder to get the loan and there would be less coffee/one more hipster without a barista job. Of course this example can break down in several ways (e.g borrowing to consume) but it is the main reason why no economy on the planet currently uses or is likely to go back to the gold standard and why no mainline economists are looking into bringing it back.

    The benefits simply outweigh the costs.

    The fascinating part, that in a perverted way it's working. The inequality gap is growing faster, but those living below the UN poverty line are also disappearing as if attached to a rocket. Of course it's a case of most people getting cents and others hundred dollar bills, but it's hard to put a price on people not starving. Which is why economists rarely can give clear cut answers and people rarely listen us.
     
    #26 Sapereaude, Mar 20, 2016
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  27. stan.distortion

    stan.distortion Active Member

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    I wouldn't say no economies on the planet use the gold standard, the entire Muslim world still uses is (or is supposed to at least, many do), Iran and Syrias economies are gold based and so was Libyas until a few years ago. It's conspicuous that the places still using it are the number 1 enemies of "freedom and democracy", practically the first thing the "rebels" did in Libya was give up their central banks sovereignty and 144 tons of gold was stolen from the country in the process, we westerners keep saying gold's not important anymore but we seem to bring an awful lot of chaos and suffering to anywhere that thinks differently.

    /Rant and sorry for going off topic, gold was used merely as an example and cowrie shells would have done just as well, the problem caused by it would be just the same. Anything that tries to use a single type of money mixes all kinds of value together and that ends up throwing the entire system off balance, some kinds of value are persistent (ie, improvements, autobahns, production machinery, etc.), some temporary (crops, labour, etc.), some irrational (tuplimania, dogecoin, etc.) but with a single form of money they all get mixed together and treated the same way. There's no way of distinguishing between the autobahn adding long term value to the nation and the crops adding value only until they're consumed, real value is both created and destroyed but a centralised economy has only a tenuous connection with that process and inflation is an extremely crude means of destruction, a time based mechanism that penalises all equally and serves to do little more than raise the bar on accumulation of monetary wealth.

    Growth as a measure of of progress... sorry but this rant 'aint done because that's like trying to use a barometer to measure temperature. We might as well rip up all the autobahns because the inefficiencies that would cause would do wonders for economic growth Keep going down that road and we'll all be working 60 hour weeks making things to hand straight over to someone beside us to smash up for recycling and calling it progress, if there's anything to wake the world up to the madness of economics it's the GDP.

    I'm not saying the entire field of economics is BS, far from it but there's certainly a narrow minded majority who can't see outside a system basically built with the aim of centralising power and coated with a thin veneer of sudoscience masquerading as legitimacy. There's no avoiding economics and economists who see the current system for what it is and dream up and test out all kinds of weird and wonderful alternatives are badly needed at the forefront but if they ever manage to get it those kinds of positions they don't stay there long, Yanis Varoufakis dared to suggest alternatives and was tried for treason.

    A model I'd really like to see is a something based on limitless competing currencies, I'm sure some mad economist has tried to build that kind of model and as far as I can see the result is currencies given value based purely on their merits, the best monetary medium, company shares, reserves of commodities, etc. and everything with dubious value falling away. I think that's where we're headed with crypto and some foresight into what to expect could come in useful.
     
  28. Sapereaude

    Sapereaude Well-known Member
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    I am assuming you are talking about riba and other forms of islamic banking. I knew a researcher who tried to put together an index for Islamic banking instruments once, he gave after every place he checked out eventually led to regular bank. Then again Mecca is supposed to be a holy place and looks more like Las Vegas nowadays, but I digress the simplest explanation is that they use gold precisely because they are locked out the western banking system. They are not exactly flourishing economies either. But you are right, I should have said no economy on the planet, willingly uses gold standard because the benefits outweigh the costs and we can prove it.

    What do you mean by value? It is a hugely subjective area I mean time alone is a huge factor, one day a 1 tulip is worth a house the next day its worth nothing and what are you referring to as the "system"?

    Those improvements are what are called increases to productivity and are not related (directly but lets not get distracted) to the monetary system they would exist no matter what type of money we had. Tulipmania, Dogecoin, The Internet Bubble are all examples of "irrational" markets and investor behavior and not the type money we have, again they could have happened if we used seashells. As for inflation as long as the value created by inflation (eg economic growth is a 3% and inflation is a 2%) then benefits outweigh the costs but this depends on a whole host of factors one of which is a good independent central bank.

    As for the accumulation of wealth, yes there is a clear snowball effect in regards to wealth, but we are talking about the best type of money here. This again could occur if we had seashells. The fact the rich are getting richer is to due to multiple factors, nature of the current economy, the productivity of capital vs labor, labor laws (0 hour contracts *ugly horrible nasty things* ), lowering tax rates and globalization/algorythmization/automation of the methods of production and services. Lets stick to money itself for now, I have nightmares enough about the terrible dystopian future ahead without dwelling on those further.

    We would only suggest that as a joke because that would not increase economic growth. It would increase employment but we would produce less stuff so it would have the opposite effect. Also we are aware of how useless GDP is we use NGDP and other statistics now.

    Look if I wanted an easier subjects I would have been a physicist or a chemist, you put the same mix of atoms in a room at the same temperatures and the same level of energy or a catalyst you will always get the same results. Unfortunately we are stuck with human beings and they just don't wanna co-operate and clones are just so god damn expensive : p. As difficult as it is it something that needs to be studied and if used correctly could improve the world beyond your most cherished fever dreams. Hell a single health economist can save more lives than a hospital or kill more...

    I am tired so I am going to a be a bit blunt and say I so god damn furious exhausted and sick to the deepest parts of my stomach of these asinine conspiracy deductions from armchair economists. You wouldn't go up to a general and tell him how to deploy his troops or make a diagnosis if you are not a doctor, but every man and his dog has this idea they the entire economic system is a giant conspiracy theory. Especially since as I've explained it is so very hard for us to get simple results and there is always a but, if when, only when, clauses to what we study!!

    However the fact that people are screwing everyone over all the time It is not so difficult to explain. example - banker one starts making lots of money selling these subprime mortgage thingy(SPMT), he brags to his friend who goes to his boss and says they should start selling these SPMT's, soon everyone's selling SPMT's and everything seems great until some guy realizes these SPMT's are shit, but hes not gonna say anything because hes also making the moneys and around and around it goes util we get the hangover we richly deserve.

    THIS IS DUE TO underpaid second rate legislators going up against their well paid better educated counterparts and fact that the justice system is letting these guys off!!! This is a result of politics. Not economics! I mean Adam smith was giving examples of this BS nearly a century ago... I am not saying that conspiracies do not exist but mostly its just a whole bunch of shortsighted people(assholes) interacting, who organically create a system that supports each other because they are all benefiting(making dat bling) from it.

    So let me reiterate, money in the form it is now is the most efficient method for economic growth that we know of and while I do see crypto possible replacing it, it has not matured enough yet.As for all the other issues they are mostly political issues or not directly related to the nature of money. We do have a lot of work done on those issues as well but people ignore us or cherry pick the results. The whole moronic Austerity stuff was based on 1 paper that ended being discredited *sigh*.

    On A lighter note I would suggest you watch this fake rap battle between two of the more famous economists, it is one of my favorites. They not only more entertaining than me, but highlight some issues you brought up. You will like Hayek : ).



    Edit- Maybe all economists should start rappin.
     
    #28 Sapereaude, Mar 20, 2016
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  29. stan.distortion

    stan.distortion Active Member

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    Lol, very good :) Yeah, definitely cheering for Hayek in that fight but probably cheering for a different ring entirely if they'd both argue in favour of a single currency, I'd imagine Hayek wouldn't if he argues for complete freedom of markets though.

    Libyas economy was doing incredibly well using the gold standard but that's because they have oil and so a constant surplus. Same for Iran and Syria, they've got a lot of what the world wants (oil) and are able to sustain themselves so they grow rich on the gold standard but a country that can't run a surplus couldn't, they'd quickly be cut off from international markets.

    The other end of the scale interests me more though, many Muslims manage their own savings rather than save with banks which is a complete opposite to here where savings are highly discouraged, it's seen as a backlog in the pipes that must be tapped and circulated and I'd strongly agree with that principle but using something that's also intended to be a store of value as the medium for it makes no sense at all, it's like trying to attach wheels to a house. The ironic thing there is fiat in the Islamic world likely works much better because it's purpose is convenience, anything that stays around long enough to be called savings goes into gold or other things better suited as a store of value.

    Lol, the holy church of the dollar bill and all it's supporters is what I guess I mean by "the system", life in the modern world is practically impossible without money and we have a hard time even thinking about value without reference to it, the only other concept I can think of that reached a position of such importance is God. But we're not talking about theology so just sticking with pipes and flows... no value is created by inflation, it's value transferred from the money in circulation to the issuer. Not the kind of idea many would choose if given a choice but it has it's uses and they're where it should be used, things like state budgets, not as a hub entire economies revolve around. A large economy is an incredibly complex system and has a lot in common with fluid dynamics, we can't even predict every flow and pressure of air currents through a small town so what hope do we have when the "air" has many different forms, all of them subjective, the area is entire continents and the flow isn't restricted to 3 dimensions? When we can predict the weather with a high degree of accuracy for long periods we may have a hope of making reliable economic predictions but for now the best we can do is carry an umbrella and that's pretty much where crypto comes into the picture.

    It doesn't take a conspiracy nut to see something's not quite right. For example there's something like an estimated $16 trillion sitting in offshore accounts, that's equivalent to the entire US GDP and that's just the stuff that's buried, many times more is perfectly legitimately sitting around doing nothing. Sure, the rich get richer but what you're seeing there is amplification, riches beyond the limits of wealth and more value than there are things to buy and that can't happen with a system that's working properly, the rich get richer until there's nothing left to buy and then it stops. Trying to fix that problem has instead amplified it by allowing the accumulation of artificial value and there's no upper limit to it, raising inflation to 5% just means only those accumulating at more than 5% keep getting richer while the poor get poorer with 5% compound interest and at some stage we have to ask ourselves where is the supposed value that's backing all those trillions?

    The issuer gets to spend what's taken out by inflation and that's just fine if you trust the issuer. The issuer here is the lender of last resort and that position came from owning a damn big chunk of pretty much everything worth having, more than enough to cover any debt but does that still hold true? If even a few percent of all those trillions came flooding out the results would be catastrophic, the rest wouldn't be far behind them and that can only get worse as more artificial value is created and accumulated. Neither Keynes nor Hayek fix that problem and can't without majorly changing the way we look at value and that goes way beyond what we consider economics.
     
  30. Sapereaude

    Sapereaude Well-known Member
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    stan.distortion
    Well is a relative term, they would have been doing better without the gold standard.

    People managing their own savings in the sense of hiding money under the couch or burying gold on the farm is actually very bad for the economy. Since it is not being used to finance shops or purchase goods and usually leads to deflation. Not to mention saving in aggregate is not always good, in the sense that a saving rate greater than the the real potential growth capital needs of a country would in fact cause growth to be slower(japan has a huge problem with this). There is in every sense of the word an optimal saving rate for a country. If anything we actually have a saving glut worldwide at the moment, of course most of this is money owned by the rich but we are talking about available capital investment from savings, not wealth inequality.

    Being a store of value is only one consideration of something being a money and I will have to strongly disagree with fiat in the Islamic world working much better. Once again putting money into gold means the gold is not being used for productive purposes and hoarding leads to deflation. It is also more inefficient or time consuming to use gold. E.g. To start a business it takes me 10 seconds to transfer money or get a loan on my phone, while you would physically have to take the gold to a merchant and if he is in another city... http://krugman.blogs.nytimes.com/2010/08/02/why-is-deflation-bad/?_r=0


    So the choice to use money is bad because we can't predict economic growth? Again we would have this problem with seashells... while using bitcoin as the reserve currency of the world would actually have negative consequences because of its lack of inflation. http://www.bankofcanada.ca/wp-content/uploads/2016/03/swp2016-14.pdf


    Okay it seems we are not longer talking about money here, since again there could be 16 trillion worth of seashells in overseas accounts. There methods for preventing accumulation of wealth, taxes, legislation preventing rent extraction, inheritance levy etc but most of these are difficult to implement Politically(Read not economics or has anything to do with money per say). Now "riches beyond the limits of wealth and more value than there are things to buy" is a curious phrase. I would venture that prices would simply increase depending on demand(inflation) so such a scenario is not possible, the system as it is working "properly" and you could never run out of things to buy.

    As for the rest I am trying to follow if, but you need to define what is being done to fix the problem? Why whatever is being done to fix the problem is making it worse? Inflation at 5% would mean those holding money would have their money be worth 5% less after a year. Why does something have to back those trillions? Nothing has backed those trillions for a long time and we are all better off for it. I cannot see why having a monetary system where money is backed by reserve banks leads directly to the wealthy accumulating being faster. Once again we could use seashells had the current scenario occur since the accumulation is not cause by the nature of the money, but due to other factors. Weak legislators, low taxes/tax heavens, externalities not being included in costs etc.

    Actually the issuer get seigniorage and you can be a lender of last resort without owning anything, you just need the legal right to issue more currency. As for the rest man there is no such thing as artificial value, something can be temporarily overvalued. That thing can be a currency but it is no permanent as markets will eventually(in the long term) adjust to reflect this. There is no need to revalue "value" nor would it be possible to do so since it is a relative term. https://en.wikipedia.org/wiki/Value_(economics)

    Let me show you a simple thought experiment to display that wealth concentration can be caused by other factors other than the kind of money we choose to use.

    I wave my magic wand and now there are-
    1.100 people in the world.
    2.100 golden sea shells in this world and they are the only currency.
    3.A rule making the richest 10% of the population having 30 shells and other 90% having the remaining 70 shells.
    4.Population Increases at the replacement rate of 2.5 for poor people and 2.4 for rich peoples.

    Rich 10 12 14 17 20 24 29 35 42 50
    Poor 90 113 141 176 220 275 344 430 538 673
    No. Shells per rich 3.00 2.50 2.14 1.76 1.50 1.25 1.03 0.86 0.71 0.60
    No. Shells Per poor 0.78 0.62 0.50 0.40 0.32 0.25 0.20 0.16 0.13 0.10
    Inequality 3.86 4.04 4.32 4.44 4.71 4.91 5.08 5.27 5.49 5.77


    So we can see that by simply having a 0.05% lower birth rate, inequality can increase from 3.86 to 5.77 in 10 generations. Now these numbers are rounded, but the point I am trying to make is that income inequality has a number of factors and simply replacing dollars with grams will not change that.