25 Sep 2014


Potpourri 20 Comments

==> My colleague Dan Simmons (at IER) on the BBC. I told him he should’ve adopted a Paul McCartney accent.

==> This is an interesting graphic contrasting Keynesian with Austrian economics. (HT2 Tom Woods) I could quibble with a few little points but that would be like objecting to the Hayek/Keynes rap video for not discussing reswitching.

==> How do you guys feel about this “explain Bitcoin like I’m five” piece? (I’m not the author, to clarify.)

==> Jeff Tucker on Bitcoin and Mises’ regression theorem.

==> I’m not positive, but I think Tyler Cowen is saying we’ve been getting “lucky” with various groups not wanting to secede. As Vader might say, “It would be unfortunate if I had to leave a garrison here.”

==> A while ago I had a pretty good line on Facebook asking, “Would people be as terrified if they were the Koch sisters?” Well, someone sent me this.

20 Responses to “Potpourri”

  1. MB says:

    RE the bitcoin piece, I’ve sadly not kept informed. Seemed like a simple enough first level explanation to someone who knows nothing.

    Can someone further explain the distributed “ledger”? When A and B make a transaction, how does the entire network know that’s a legitimate transaction if it’s using the entire network to validate it? Does it only object if it finds a discrepancy within some time frame or count of peers?

    And how is this considered secure or anonymous if it records literally every transaction ever?


  2. laugh says:

    Funny how the graphic defines inflation as “artificial increase in the money supply and credit” and then quotes Ron Paul claiming that inflation hurts the poor and middle class the most because it causes higher prices for goods and services. First, he is not defining inflation as an increase in prices. Second, he is admitting that inflation drives up wages (price of services). Poor people get money by selling their services. They do not care about an increase in the money supply since they have no money. If they are hurt it’s because prices rise faster than their wages. However, as Ron Paul admits, wages increase.

    Austrian school is [not good–edited by RPM.]

    • Scott D says:

      Oh, hi again.

      I trust you have a chart which depicts the growth in wages across all sectors and levels in lockstep with inflation, yes? It should be right next to your proof of perfect knowledge and your rebuttal of Cantillon effects. It would be a pity for you not to share.

    • Major.Freedom says:

      Your post is your name.

    • Major.Freedom says:

      Seriously though, if poor people can increase their wages because there is now more money available to pay wages because of inflation, then you are talking about a scenario where poor people have already been screwed by a past devaluation of money. People have already benefitted at the poor people’s expense, and it is at their expense because the inflationary system is based on initiations of force.

    • Darien says:

      I know, I know: don’t feed the trolls. Still, this is such an easy one I can hardly resist taking a crack at it.

      Your assertion would be true if (and only if) inflation were uniform across all sectors. But here in the real world, that’s not how things work; some people will get the newly-printed money first, and will spend it at the old prices buying goods and services. This is exactly what *causes* the rise in prices; it’s not that everybody checks the current M2 before making a sale and adjusts his prices accordingly, man. Prices go up because suddenly there’s more money being bid against the goods, causing the goods to become relatively scarce.

      • Tel says:

        Ron Paul tends not to explain it that way. I think the problem is that Ron Paul needs a quick and easy to explain message to get across to people, so he just talks about prices.

        In reality the situation is more complex, but Ron Paul does provide the long explanation for those who care to read more than a few lines.


        Let’s stop dreaming and look at the reality of things. What if I told you that these “money elves” do exist and that they spring into action not just once in a lifetime, but every couple of weeks? And that they repeatedly give money to their closest friends, but not to you? That prices are going up because the total amount of money in circulation increases, but that you’re missing out on all the fun?

        Well, that’s inflation at work. Who benefits from inflation? Only those who are at the top of the pyramid and receive all that new money directly from the source. As you might have guessed by now, the source is the Federal Reserve, and its recipients include the government which “borrows” a lot of new money each year, without any intention of ever paying it back. Another beneficiary these days are failed banks that are being “bailed out” for the good of the “economy”, or defense contractors that receive money to build up our military so we can have a constant presence all over the world and fight never-ending and unnecessary wars. There was even a huge number of small-time beneficiaries who received consumer loans and sub-prime mortgages they would never be able to pay back.

        So yeah, Ron Paul clearly gets it.

        There’s a book “The Revolution: A Manifesto” which also explains inflation in some detail.

  3. Major.Freedom says:

    That Bitcoin article is the type of article I need to make sense of Bitcoin. Thanks for posting it.

  4. Major.Freedom says:

    Tucker’s article is fantastic.

    • Rick Hull says:

      Yep. I’ve argued against the dogmatic greybeards before, and separately argued for the value of the payment network, but he synthesizes it perfectly so that one can only ignore BTC as Misesian money by fiat, as it were.

  5. Major.Freedom says:

    “Yes, if you had bought $100 worth of bitcoin in those days, and not sold them in some panic, you would be a half-billionaire today.”

    That’s…..kind of depressing.

  6. Philippe says:

    I read this the other day, regarding those brave, valiant, freedom-loving confederates and all that.

    Not that I endorse everything written in the article, but it provides an intriguing counterpoint to the neo-confederate line:


    • Enopoletus Harding says:

      brave, valiant, freedom-loving confederates and all that.

      -Nobody here has ever even remotely implied this.

      • Philippe says:

        but all they wanted was their freedom.

  7. Joseph Fetz says:

    Bob, I have a serious question for you. Did you notice that in Tucker’s piece that a lot of what he is saying mirrors my own words to you, as well as here in the comments and on Facebook?

    Of course, the very first Eureka moment came when I read Böhm Bawerk and realized that it is a service, and as such this proves the use value of Bitcoin, much in the same way that Western Union, Visa, and other payment systems have use value. Of course, the primary difference being that Bitcoin uses its own unit of accounting rather than the dollar and it is a trustless system.

    • Joseph Fetz says:

      Of course I must mention that Jeffrey and I talked quite a bit about this subject, but at the time that I relayed my ideas to him, he had already read Konrad Graf, of whom I was not aware of at the time.

      I think that it is pretty cool when a simple guy like myself comes up with a solution, that people who are far more knowledgeable than myself agree that it is correct.

  8. Smiling Dave says:

    About the Tucker article. The key idea, the EUREKA! that makes Jeff jump out of the bathtub like Archimedes and buy bitcoins, is that “Bitcoin is both a payment system and a money. The payment system is the source of value, while the accounting unit merely expresses that value in terms of price.” He understands that this is something “most commentators have had trouble wrapping their heads around.”

    Jeff, my son, go back to the bathtub, relax, and read my article of February 2014, which refutes your absurd statement. Here’s the link: http://smilingdavesblog.wordpress.com/2014/02/17/bitcoin-as-postage-stamp/

    Actually, the credit goes to Frank Shostak, who anticipated this nonsense long ago. He wrote. “Because Bitcoin is not real money but merely a different way of employing existent fiat money, obviously it cannot replace it.”

    I explain in depth what he means in my article, but here’s a tidbit to whet the appetite. All quotes from here to the end are imaginary, to make clearer the flow of ideas.

    Jeffrey Tucker: Seems pretty good, no? I mean, people pay for the service of having their money safely delivered from place to place. You hire a Brinks Armored Truck and armed guards, and they deliver money for you to someone. The Brinks truck and the guard are not money. You won’t buy anything with the truck or the armed guard. They are performing a service. Same thing with bitcoin; it is performing a service of transporting money, which is not the same as actually being money. Thus it performs a service which satisfies the regression theorem.

    Frank Shostak: But imagine if you call up the Brinks truck company and had the following conversation:

    SD: Brink’s Truck Company?

    BT: Speaking.

    SD: I’d like to hire one of your trucks.

    BT: Certainly. Would you like armed guards as well?

    SD: Absolutely. I need a truck big enough for ten million dollars in cash.

    BT: I’m sorry, the only trucks we have now are filled with cement. There is no room to put any money inside. You’ll get a truck, armed guards, all the prestige that goes with people seeing our trucks and men outside your establishment, but you cannot put any money inside the truck.

    SD: Forget it. that’s not the truck I was talking about. A truck that holds money and one that cannot hold money are two different trucks. Apples and oranges.

    You see the problem. As long as bitcoin transports dollars or some other currency, it is like that truck filled with money. It serves a purpose. But once bitcoin itself becomes the money, then it is like a truck that you cannot fill with money, but have to send from place to place, empty. Doing that, moving around an empty truck, serves no purpose. You can’t say that because a bitcoin that transports dollars has industrial value, then so does a bitcoin that doesn’t.

    So we are talking about two different kinds of bitcoins. One of them transports money, and has some use. That will not make some other bitcoin, one that does not transport anything but itself, have industrial use.

    Imagine if right now there were two kinds of bitcoins, call them dollar-coins and nothing-coins. The dollar-coins had a market where they could be exchanged for dollars, but the nothing-coins, for whatever reason [maybe legal problems, it doesn’t matter why], could not be exchanged for any currency at all.

    Clearly, the fact that dollar-coins serve as postage stamps give them some non monetary use, but equally clearly, that does not give the nothing-coins any non monetary use whatsoever. The dollar-coins and the nothing-coins are apples and oranges, I think it’s clear. So the nothing-coins do not satisfy the regression theorem, even though the dollar-coins do.

    When we talk about bitcoin someday becoming money, we are talking about them transforming from dollar-coins into nothing-coins. Just because they have non-monetary use as dollar-coins does not mean anything at all when they turn into nothing-coins. The situation would be similar to a debasing of a gold coin, where instantly people stopped taking at par.

    Don’t forget to read the whole article before making silly objections.

  9. Smiling Dave says:

    The digital apples article does a very good job, because it leads anyone with half a brain to ask himself at the end, “But how can I eat a digital apple?”

    Which is exactly the problem Mises was talking about in the Regression theorem..

  10. Harold says:

    A couple of thinbgs I don’t quite get about the bitcoin thing. “On the day of its release (January 9, 2009), the value of bitcoin was exactly zero. And so it remained for 10 months after its release. All the while, transactions were taking place, but it had no posted value above zero for this entire time.”

    If transactions were taking place, how can the value be nothing? There may not have been an exchange rate, but people who swapped things for bit coin placed some value on them.

    I have an alternative to the regression theory. Most things that are portable, divisible, fungible, durable, and scarce will have some intrinsic value. Therefore anything that ends up being used as money will have had some value before it was used as money. It is not a requirement that it must have had value, it is just an inevitable consequence of the properties that money needs to have.

    • Smiling Dave says:

      It is not the regression theory, but the the regression theorem. It is something proven deductively from first principles. So you cannot propose alternatives until you refute the proof.

      What you are doing is this;

      I have an alternative to Pythagoras’s Theorem. Instead of A squared plus B squared being C squared, they are always bigger than or equal to C squared. It is not a requirement that they equal C squared, it just that most of the time they are.

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