03 Dec 2013

Potpourri

Bitcoin, Economics, Health Legislation, Potpourri, private law 45 Comments

==> Josie the Outlaw saunters into town, and lays her gold piece on the bar countertop. When the sheriff shows up, I hope he’s articulate and has really thought through his life choices.

==> More Bitcoin battling. Gary North is skeptical, Jeff Tucker is enthusiastic, and Roger Ver is loaded.

==> I’m a big Glenn Greenwald fan but if this blog post is accurate, my admiration is tempered.

==> Did y’all catch this line from Obama? “Obviously my most recent concern has been that my website’s not working…We’re evaluating why it is exactly that I didn’t know soon enough that it wasn’t going to work the way it needed to.”

==> Last thing: I can’t remember if I’ve already plugged it here, but I highly recommend the current Hunger Games movie. However, you really need to have seen the first one (or read the books) to appreciate it.

45 Responses to “Potpourri”

  1. Ken B says:

    As for Greenwald, even a journey of 1000 miles begins with a single step.

  2. Matt M (Dude Where's My Freedom) says:

    This might sound like an odd question, but does anyone know if the Hunger Games movies are somehow more libertarian/anti-state than the books? The reason I ask is because I remember the books being very popular with the public at large, but I can’t recall any massive promotion of them by the “liberty movement.” The Bob Murphys and Jeffrey Tuckers of the world weren’t blowing up my facebook with glowing recommendations until the movies came out. Is that just a coincidence?

    • User1 says:

      I’ve only read the first book and watched the first movie. I thought the movie had a much stronger libertarian message; it really delved into the dystopia world that the story takes place in.

      The book felt more like an action-adventure story, more Harry Potter than 1984.

    • Dan says:

      I initially avoided reading the books because I kept hearing them compared to the Twilight series, but this review on LRC was got me to give them a chance. http://www.lewrockwell.com/2012/03/formerly-spherical/what-if-you-read-the-hunger-games/

  3. Major_Freedom says:

    Obama: “But the good thing about when you’re down is that usually you’ve got nowhere to go but up.”

    Because it’s better to go from rock bottom up a level to the gutter, than to go from Awesome down to Swell.

    Loss aversion…

  4. Scott Lazarowitz says:

    “I’m a big Glenn Greenwald fan but if this blog post is accurate, my admiration is tempered.”

    FWIW, I wrote these posts on Greenwald’s control-freakishness over releasing certain documents and not releasing others.

    http://scottlazarowitz.org/blog/2013/10/the-state-wants-to-keep-its-crimes-a-secret/, http://scottlazarowitz.org/blog/2013/10/the-gatekeepers-and-their-controlled-redacted-leaks/

    And there I linked to Arthur Silber’s posts on that. In contrast to the carefully and controlled Snowden-Greenwald leaks, Bradley Chelsea Manning and WikiLeaks released many more documents, unredacted, and let the chips fall where they may.

  5. Chris P says:

    On bitcoin…you guys should read Erik Voorhees’ open letter to Peter Schiff after their debate. I dont know how libertarians could still be skeptical after reading it.

    http://www.dailypaul.com/306734/open-letter-to-peter-schiff-by-erik-voorhees

    • Rick Hull says:

      Great link, thanks Chris!

    • Smiling Dave says:

      Even a libertarian has to be careful to support viable things, not tulip manias. So the value of that open letter hinges on its economic arguments, not its love of liberty. And those economic arguments are fatally flawed.

      Anyone who knows what reductio ad absurdum is will understand why that open letter is one big boo boo. Here’s the reductio, but first we quote the key sections of that letter:

      “Now, during the show, you agreed that perhaps this payment network has utility. So, if the network (Bitcoin) has utility, and only one currency is accepted on this network (bitcoins), and those bitcoins are scarce, then should not those units themselves command a market price? Who knows what that price should be, but there should be a price, no?”

      Guys, I want everyone to think of something totally useless to them and the world. I’m going to use something of medium grossness, toenail clippings, and using reductio ad absurdum, show how false that open letter argument is. In fact I will use his argument word by word, but applied to my toenail clippings delivery system:

      My toenail clippings are very scarce. I mean really really scarce. There are very few of them around.

      I set up a whole payment network, Toe-coin, for people who want to buy and sell using my Toenail clippings as money.

      Now, during the show, you agreed that perhaps this payment network has utility. So, if the network (Toe-coin) has utility, and only one currency is accepted on this network (Smiling Dave’s Toenails), and those Toenails are scarce, then should not those units of Toenails themselves command a market price? Who knows what that price should be, but there should be a price, no?

      Anyone see now how ridiculous that open letter is? Let’s try the same thing on another part of that letter, and I quote;

      “Any good that is useful and scarce will have a price (consider that air is useful but not scarce, and fish with three eyes are scarce but not useful, thus no price for either of them). Because the Bitcoin network is useful, and because only scarce bitcoin currency units are permitted on this network, the bitcoins themselves have a price. Indeed, they must have a price until the network is no longer useful, or the coins are no longer scarce.”

      The reductio:

      I have a horse. Horses are useful. They transport things long distances. But my particular horse is old and finicky and for some reason will only transport Smiling Dave’s Toenails. The horse is useful, the toenails are scarce. Load up that horse with Toenails and that old nag suddenly has a price, I mean that thing is valuable, isn’t it?

      To truly understand bitcoin, that Gary North article is pretty valuable. And for a more in depth analysis you always have my humble Proof That Bitcoin is a Bubble:

      http://smilingdavesblog.wordpress.com/2013/10/24/proof-positive-that-bitcoin-is-a-bubble/

      • Matt Tanous says:

        ” So, if the network (Toe-coin) has utility”

        Your analogy fails the second your “toe-coin network” does not provide utility. And it doesn’t, unlike the bitcoin network.

        “To truly understand bitcoin, that Gary North article is pretty valuable.”

        Except bitcoin is not and CANNOT BE a Ponzi scheme, which means all of North’s analysis is erroneous.

        Really, you anti-Bitcoin nuts are just reaching now.

        “And for a more in depth analysis you always have my humble Proof That Bitcoin is a Bubble”

        I see a lot of psychoanalyzing and speculator demonizing. Really, I’d expect something like that from a Keynesian….

      • Major_Freedom says:

        “My toenail clippings are very scarce. I mean really really scarce. There are very few of them around.”

        That isn’t what economic scarcity means. Scarcity does not mean “very few around.” It doesn’t even mean a “unique thing.”

        Economic scarcity arises only when more than one competing use for a good exists. For example, if Mr. Smith thinks your toenail clippings are better off being thrown away, whereas you think they’re better off as your dinner, then those clippings would be scarce.

        But, and this is the key point, if there are no competing uses for your toenail clippings, then they are not scarce.

        Finally, you can’t prove something is in a bubble through observation. Bubbles include a subjective valuation component. You can only make guesstimates by inferring available capital in relation to estimated “internal” subjective valuations.

  6. Cosmo Kramer says:

    I was a little surprised that Austrians would be so anti-bitcoin at first. With crypto currencies, there is no limit to the amount of competition. This isn’t a problem for the market, it is a problem for bitcoin holders. Just imagine if Gold rallied to $20,000/oz and Silver was still $20/oz. This is what I see happening to bitcoin right now, and it simply won’t continue. I totally agree with Dr. North. Bitcoins=Tulips.

    • Matt M (Dude Where's My Freedom) says:

      If it’s that easy, why isn’t everyone doing it? Bitcoin has continued to rise in price even as additional competitors enter the market. There doesn’t seem to be any relationship between the two at all.

      • Cosmo Kramer says:

        It has only been a few months. I am thinking past this or next year.

        • Matt M (Dude Where's My Freedom) says:

          A few months since what? Bitcoin has been around for years. The technology to replicate it has been commonly known. There already are competitors, and have been for longer than a few months.

          I had a friend who a couple years ago was loudly telling anyone who would listen they should buy bitcoins back when they were under $2 each. Gold/silver is an invalid comparison because they are equally accepted and valued by the common person. Bitcoins are valued more than any of their competitors. That’s not an arbitrage opportunity any more than buying Safeway brand cola, sticking a Pepsi logo on it, and attempting to sell it as Pepsi is. Bitcoin is a brand.

          • Cosmo Kramer says:

            If Safeway brand cola has the same formulation, then the only difference will be the difference garnered by the brand name. Bitcoin may always be the most valuable crypto currency, but I refuse to believe that the current lack of real competition will last.

            • Matt M (Dude Where's My Freedom) says:

              But there already is competition. What makes it “real” or not is entirely subjective. Although you seem to have set up a classic heads I win, tails you lose scenario by which any competition that doesn’t successfully drive down the value of Bitcoin can be dismissed as somehow “unreal.”

              • Cosmo Kramer says:

                Of course there is competition already. And no I don’t consider it a “heads I win, tails you lose” scenario.

                My views are that this is all brand new. I think crypto currencies will make a real impact on global economics. This means that I see bitcoin having a larger impact than it currently does. I just see a role for many others operating in parallel. This is going to take a while to play out.

                Again, you and everyone has made very good points.

    • Matt Tanous says:

      “Just imagine if Gold rallied to $20,000/oz and Silver was still $20/oz.”

      If gold became money, and silver did not, this is PRECISELY what one would expect – the price of silver would remain roughly constant in terms of alternative currencies, while the price of the new money would rise into the stratosphere….

      Dr. North’s emotional diatribe deserves no response. The nonsense about Ponzi schemes to start with is just so ridiculous….

      Here. Just, here: http://consultingbyrpm.com/blog/2013/10/why-misesians-need-to-tread-cautiously-when-disparaging-bitcoin.html

      • Cosmo Kramer says:

        “f gold became money, and silver did not, this is PRECISELY what one would expect”

        Everyone’s responses are so good and valid, I just have to believe that valid competition will arise against bitcoin. I truly cannot wait to see what this will all look like in 5 years.

        I hope to not come off as “anti-bitcoin”. I think this advances us closer to what I ultimately want.

  7. Ash says:

    I don’t understand Baker’s (and yours, I guess) insinuations against Greenwald. The point of GG’s reporting is to point out the capabilities of the NSA, not criticize the tactic of exposing people as hypocrites per se. In GG’s book he reported information using public information (news articles, etc.), not by wiretapping phone calls or tracing internet activity. By reporting this latest story, he revealed that the NSA can track any individual’s specific online web activity–yes, it’s being used to target terrorists/”radicalizers” now, but it could be used to come after you tomorrow.

    Plus, how did Baker expect GG to include that quote from him? To include a background on GG’s personal publication history, followed by a personal defense from GG on a multi-authored article, and then go back to reporting on the specifics of the new documents? That seems like it would do more to confuse the issue than to clarify.

    • Matt M (Dude Where's My Freedom) says:

      That’s a fair point, although I personally got a strong sense of a “This is a creepy tactic that nobody should employ” from most of the articles about the story. In the interest of unbiased journalism, it would probably be a good idea to include a sentence like “Although this tactic has been used privately with mixed results, the use of it by the NSA through questionable methods is the chief concern here.”

  8. Joseph Fetz says:

    On the Gary North piece, this response from Ben Stone (Bad Quaker) was quite good and thorough.

    http://www.badquaker.com/archives/2914

    • Rick Hull says:

      Found this, from Jeff Tucker, in the comments on your linked page:

      http://libertarianstandard.com/2013/12/01/ponzi-logic-debunking-gary-north/

      • Rick Hull says:

        Sorry, Jeff Tucker’s blog. John Mather’s words.

        • Joseph Fetz says:

          No problem, I got what you laid down.

          Yes, I saw that before I heard Bad Quaker’s podcast.

          In the comments of that LS paper I found this:http://www.garynorth.com/public/11843.cfm

          And this:
          http://www.garynorth.com/public/11844.cfm

          This is all very interesting, but what I liked about Ben Stone’s podcast is that it gets to the root of things, which is that Gary is a bit out of his league here. And just like Ben, I agree that Gary is a very intelligent man and has been the subject of particular allegations (good thing that I know how to compartmentalize), and I’ve enjoyed much of his work, but I don’t think that he’s got even the basics of Bitcoin understood.

          Right or wrong, that would be the first step of my inquiry.

          • Smiling Dave says:

            All the nitpicking about North’s article misses the essential point. North is saying, in simple language anyone should understand, that bitcoin violates the regression theorem. He lays out the steps any thing has to go through before becoming money, and explaining how bitcoin has gone through zero of them.

            As for bitcoin not fitting the strict definition of ponzi scheme, that is a nitpick as well. The essential feature is one North nailed, that it relies some on idiot further down the road to provide the money to keep the scheme going.

            Gary is not out of his league here, and he is not the one who does not have the basics of bitcoin understood.

            At this point, the universe will divide into groups. Group A will be happy to sit smugly in their ignorance, and Group B will seek the truth an go to my humble website to the article http://smilingdavesblog.wordpress.com/2013/10/24/proof-positive-that-bitcoin-is-a-bubble/

            They will also read all the linked articles, and the articles linked to in the links. Sorry that bitcoin is a subject around which a dense forest of foolishness has grown, requiring several patiently written articles to clear the path to enlightenment, but that’s the way it is.

            • Matt Tanous says:

              “North is saying, in simple language anyone should understand, that bitcoin violates the regression theorem.”

              Then he’s wrong. There is a price for Bitcoin today. By definition, the regression theorem only requires that a price exist before something becomes money.

              “So my point is, the certain group of Misesians who keep deriding Bitcoin and saying it will eventually collapse, it’s a passing fad, it will never take off beyond internet geeks, etc. etc., because of Mises’ regression theorem, aren’t making any sense. Mises’ regression theorem wasn’t making an empirical prediction about a medium of exchange never attaining the status of money, unless it started out as a regular commodity. No, Mises is saying we can’t conceive of even a medium of exchange (which is a weaker condition than money) that didn’t start out as a regular commodity. Bitcoin is clearly, unequivocally a medium of exchange right now. There are websites where people trade Bitcoins directly for “real” goods. There are people who will sell a “real” good for Bitcoin, intending only to trade away the Bitcoin in the future for something else “real.” Thus Bitcoin is right now a medium of exchange, no doubt about it.”

              “The essential feature is one North nailed, that it relies some on idiot further down the road to provide the money to keep the scheme going.”

              No one “provides money” to the “scheme”, anymore than one “provides money” to the “milk scheme” to “keep it going”. One simply trades for a commodity.

              The fact that you cannot recognize a commodity when it appears before you is frightening.

              • Smiling Dave says:

                I replied to “as long as it has a price” argument in your post later down this page.

                That long quote from Bob, about we cannot conceive, is a big mistake, as I have shown on my website. Just search for Murphy, or bitcoin.

                There is a vital difference between milk and bitcoin, and that huge difference is what Gary North is talking about. There are many many people who buy milk to consume, to use, to drink.

                But the vast vast majority of people buying bitcoin, some estimate the number at 95% of all bitcoins in existence, buy it with the intention of selling it later to the sucker.

                To quote Bob Murphy: Note that all prices are driven by supply and demand. But when we say that an asset is in a bubble, what that means is that the demanders (i.e., new buyers) aren’t buying because of “fundamental” reasons, but rather for speculative reasons. In other words, they are only buying because they think the price will go up.

  9. Koen says:

    Re Glenn Greenwald: unlike the US gov’t Greenwald didn’t spy on Republicans, committing several felonies, to obtain his information about the private lives of said Republicans. That’s the major difference. I don’t think Greenwald was criticizing the NSA for pointing out hypocritical behavior in those it spied on, I think he was criticizing them for spying on those people in the first place, or more specifically for spying on them for a reason that obviously no judge, not even a FISA court, would approve of.

  10. Major_Freedom says:

    The Bitcoin controversy is interesting, because both the “naysayers” and the “believers” are correct in the sense that “the market” is a process of voluntary exchange. As long as North and his opponents recognize that their dispute over Bitcoins is actually the market process surrounding Bitcoins, then neither are wrong in terms of value. Value is subjective. North is free to value Bitcoins less than their current exchange rate, while others are free to value Bitcoins higher than their current exchange rate.

    I hope both sides will agree that the market doesn’t require everyone to agree on the value of a good. But both sides should definitely agree that the market process is the best method to establish whether Bitcoins survive or not. If you asked me, they are surviving the market test, at least for now, which is all any free market discussion can ask for. I am sure North would agree that it is possible, in principle, for personal computers to one day become essentially worthless. Technological progress, etc.

    Seems to me that North is just letting his prejudice get in the way of sound economic reasoning.

    • Matt Tanous says:

      Ponzi.

      There. Now I don’t have to do any real analysis.

    • Smiling Dave says:

      Neither are wrong in terms of value to them personally, but one of them is very very very wrong about bitcoins future market price. North is right that its market price will be zero someday, no matter how much anyone loves it personally.

      A free market discussion can ask for much more than whether something is surviving the market test, at least for now. It can discuss the future, aka make predictions. North has made a prediction, which Mises wrote is the whole point of studying economics, and his economic reasoning is sound.

      • Major_Freedom says:

        “Neither are wrong in terms of value to them personally, but one of them is very very very wrong about bitcoins future market price. North is right that its market price will be zero someday, no matter how much anyone loves it personally.”

        Actually, if someone loves it personally, then presumably they would exchange for it. That would generate a market price.

        But I see your main point. Although I don’t see how a strong argument can be made against Bitcoins, a la North, given that they are being purchased every day by many people around the world.

        • Matt Tanous says:

          “Although I don’t see how a strong argument can be made against Bitcoins, a la North, given that they are being purchased every day by many people around the world.”

          One cannot be made. The argument being put forth is that the regression theorem means Bitcoin cannot be money, and thus the speculators buying it on the grounds that it will become money will lose out when it fails to get there.

          However, even if true (and this is decidedly NOT true), this would not mean that the value of a Bitcoin will necessarily be zero. It could still be a decent and valuable payment network with some value accruing as a result.

          More importantly, the very fact that Bitcoin has a price proves that the regression theorem applies to it just fine. As long as price ratios exist, a good can become money – this is precisely what the regression theorem requires.

          • Smiling Dave says:

            ” As long as price ratios exist, a good can become money – this is precisely what the regression theorem requires.”

            This the same mistake Bob Murphy is making, a result of not bothering to actually read Mises.
            He did not say that as long as price ratios exist a good can become money. What he did say was that as long as the good A. has a non monetary use, and B. the non monetary use is in wide demand, the good can become money.

            Bitcoin fails on both counts. It has no non monetary use. And since it has no non monetary use, that non existent use cannot possibly be in wide demand, obviously.

            The problem with a so called price ratio is that it has to be a trusted price ratio. Gary North explained this very well.

            .

            • Bob Murphy says:

              This the same mistake Bob Murphy is making, a result of not bothering to actually read Mises.

              Hey Smiling Dave, I am a pretty fair and open guy when it comes to people criticizing me on this blog. But in the future please don’t say something so patently absurd. If you want to say, “It’s amazing that Bob Murphy misunderstands what Mises is saying, even though he’s written several books about Mises and so must have read the passages in question at least a dozen times,” then fair enough.

              • Smiling Dave says:

                I was actually being generous, thinking it the less embarrassing possibility.

            • Ken B says:

              Wow!!

              Bob you just so have to eat so many words that you said about me.

              Anyway smiling Dave, the problem isn’t that Bob hasn’t read Mises, it’s that that he’s read him too much!

            • Major_Freedom says:

              That is not the regression theorem Smiling Dave.

              It is not necessary that the specific thing utilized as money have a history of being a non-monetary, directly serviceable good, for the regression theorem to be intact. If you had bothered to read both Mises and Menger, then you would have known that the theory that money must initially be a consumer good is Menger’s barter theory of money.

              Mises’ regression theorem has to do with the question of why money has a purchasing power today, but not because that money must have started as a consumer good years and years ago. No, the regression theorem states that money is expected to have value tomorrow because it has purchasing power today, and, money has purchasing power today because of yesterday’s expectations that it would have purchasing power today. And so on, back in time. And, as we go back in time, it is not necessary that the concept of money be encapsulated by the same identical commodity all throughout. There can be transitions from one monetary commodity to another, where each of the commodities in the sequence do not, strictly speaking in terms of the regression theorem, require each good to have started out as a consumer good.

              You’re conflating Menger with Mises.

              • Smiling Dave says:

                So you’re saying Human Action and Money and Credit were written by Menger? Because the ideas I mention are from there.

  11. Gamble says:

    Glad to see all that inflation is finally coming home to roosts, aka bit coin…

    • Matt M (Dude Where's My Freedom) says:

      Perhaps the next time Dr. Murphy wants to make an inflation-based bet, the unit of measurement should be the price in USD of a bitcoin, rather than the CPI…

      • Gamble says:

        Matt hopefully you just made light bulbs go on, round the world…

  12. Ken B says:

    hey Murphy. I bought your depression book for my son as a gift. So not only do you get to corrupt your son, you get a shot at mine.
    :)

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