Exactly. This is a problem. It can be so advanced that almost nobody understands it.
Now take a look at how advanced Bitcoin is:
Total circulation will be 21,000,000 coins. It'll be distributed
to network nodes when they make blocks, with the amount cut in half
every 4 years.
first 4 years: 10,500,000 coins
next 4 years: 5,250,000 coins
next 4 years: 2,625,000 coins
next 4 years: 1,312,500 coins
etc...
When that runs out, the system can support transaction fees if
needed. It's based on open market competition, and there will
probably always be nodes willing to process transactions for free.
Satoshi NakamotoThat's a ridiculous claim.
As if the development of complex technical devices wouldn't have happened without complex financial markets and inscrutable financial business models.
Complexity in finance .. up to a certain degree it may well serve the purposes of society .. beyond some level though, excessive complexity mostly serves few big players who can manage and understand the complexity and gain an advantage over other actors with less resources (that'd be most of the rest of society).
Care to explain how one can come to this claim based on first principles?
Maybe I'm misinterpreting this sentence of yours. I read it as: a hard money paradigm will inevitably lead to a very undesirable wealth distribuation (Gini coefficient --> 1) and there's no way to fix/prevent this other than moving from hard money to soft money.
I'd refute this claim. There are completely obvious ways to prevent Gini --> 1. Effective redistribution from wealthy to poor. The only hurdle to that is political systems, voters, governments or monarchs deciding to and then enacting it. Absolutely possible.
Besides that, if the current wealth distribution (under non hard money) isn't all but a calamity, then what is it?
Also most states are currently doing effective redistribution of wealth so it's clearly something that can be done. One issue though in most states is that the redistribution is getting outpaced by countering effects, so it's insufficient.
Phew, OK, if you write so.
> You have to replace every fucking bank employee with a govt employee ..
No, all it needs is a reasonable tax system without loopholes and where taxes are well balanced and of course reasonable services provided by the state funded by these taxes.
You have a rather pessimistic view of the world that leads you to believe that while such tax systems might be possible they allegedly haven't ever been observed in the real world. So you go on to infer that what hasn't been observed is not possible.
I think it's a stretch to draw a parallel here to the unyielding character of physical laws.
I assume the world has seen reasonable tax systems in the past but since politics/science/tech/societies/culture is constantly evolving this "state" was not stable. That it wasn't, doesn't prove it's not possible. Future societies with more knowledge on the whole subject (of creating beneficial equilibria in society) might find ways to keep desirable states over long periods of time.
Care to explain why?
I like to think I can be convinced by arguments.
> If you’d told me about btc 10 years ago, I would’ve thought it was a radical attempt at a solution.
But Bitcoin has kept working mostly the same way it started, right? Miners mine. People interested trade/speculate.
The thing about Bitcoin that changed over these years is what people think it is. Digital cash, nope. Micropayments, nope. Currency, nope. Store of value, could be. (I'm assuming volatility will decline in the long term if market capitalization approaches that of gold and as it gets adopted by millions more who don't speculate short term but just hold a few years to park some money and eventually exchange back to regular currency)
The Fed itself directly created 8T USD since 2009 (QE). Some of it in the past two years even went straight to consumer's pockets via the Treasury in the form of stimmies and forgivable PPP loans (helicopter money/MMT).
https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
That's a non-trivial amount, 41% of total M2 and 61% of the increase in M2 since 2009:
https://fred.stlouisfed.org/series/M2SL
Where did the rest of the increase in M2 come from? Fractional reserve lending by banks -- at interest rates artificially suppressed by Fed policies specifically to encourage lending/money creation.
Before the Fed was created in 1913, USD was created by fractional reserve lending by banks at market determined interest rates and the marginal increase in monetary gold and silver from mining output (typically 1-2%/yr).
This historic monetary system was dynamically unstable as mining output was uncorrelated with natural business cycles and unbackstopped banks were subject to runs during downturns. The Fed was created to solve these problems, specifically the panic of 1907.
Over time it's mission evolved from being a lender of last resort to actively targeting employment and consumer prices. Since the 1987 crash however, this official mandate was effectively replaced with one targeting asset prices - primarily stocks and houses (wealth effect targeting).
Normal business cycles were now increasingly distorted by the fed Fed responding to (or not wanting to hurt) asset prices for fear it would psychologically affect consumer and business spending and eventually employment.
This lead to a new instability: bigger booms created or exaggerated by easy Fed money, followed by bigger busts during the tightening phase.
Each boom/bust cycle led to more micromanagement by the Fed and thus more instability. Since 2008 (QE), and especially after 2020 (helicopter money) they have gone completely off the rails as seen by the M2 chart above and soaring consumer prices. "Inflation is always and everywhere a monetary phenomenon - Milton Friedman"
Basically you did answer where the M2 increase is coming from but you have no idea what is the difference between M2 and real money. If you’re following the idiots on finance twitter tweeting daily about velocity of money charts, stop, pick up a modern macro textbook and read in detail.
People should ask "whose design?" then. Who's the beneficiary of this design?
What do you think is more likely to be true?
A. The wealthy/influencial/powerful/elites use their (disproportionate) power to influence the design of fundamentals of society - such as the monetary system - in a way that benefits/stabilizes their position at the top.
B. The wealthy/influencial/powerful/elites just let the design of fundamentals of society - such as the monetary system - be in whatever way it's shaped by society or political processes.
I'd recommend listening to his interview with Lex Fridman. [2]
[1] https://capitalism.columbia.edu/files/ccs/person/cv/2015/amm...
People’s appearance on Lex Fridman shouldn’t be used as an indicator of anything. He interviews very widely and he does it well. But he isn’t very selective about guests.
Thus it appears you're merely trying to discredit one person by comparing them to another person whose views (on a totally different topic) are ridiculed/controversial (for potentially legitimate reasons).
As to Lee Smolin .. he appears rather off-topic to me in this discussion. I like his view on "There is only one universe." though [1]. Makes him stand out from the many many people who handle the meaning of words with insufficient rigor and then come up with useless conclusions.
> People’s appearance on Lex Fridman shouldn’t be used as an indicator of anything.
I was just linking to this interview because it's reasonably well done and Ammous' views come over, not because it was done by Fridman.
> But he isn’t very selective about guests.
Which is IMO a good thing.
Additionally, imagine why and how someone with an Econ degree who wasn’t very well known became incredibly famous. Enough for Taleb to write a foreword for him (although I suspect that was motivated by their ethnic common origins and less so by the rigor in the book). This is a common grift. Several professors in extremely high end Ivy League universities tried the same tactic. Including that one fucktard from MIT who claimed he’d done simulations for a million years and Terra (or some other coin, I really can’t keep all the scams straight in my head) couldn’t fail no matter what. Same motivation. New shiny thing? Let’s use it to try and increase our social capital. Less erudite crowd? The better.
Whatever you're implying here, I'm too stupid to get it.
You mean: he became famous enough despite only talking trash but in a way that fools dumb people like me? Or: he became famous through illegitimate means? Or: he became famous purely out of luck? Or: he became famous because he understood how to tell these people who mistrust some official institutions what they want to hear? Or: something else?
I just think he's got a few points right that go against today's mainstream economics. Somehow I haven't yet heard sound arguments from people who oppose the "deflation is an acceptable and possibly even better state of the economy" notion. They mostly put up strawmen.
> This is a common grift. Several professors in extremely high end Ivy League universities tried the same tactic. Including that one fucktard from MIT who claimed he’d done simulations for a million years and Terra (or some other coin, I really can’t keep all the scams straight in my head) couldn’t fail no matter what. Same motivation. New shiny thing? Let’s use it to try and increase our social capital. Less erudite crowd? The better.
I don't see why this is relevant here at all. The world is full of people trying to come out on top, almost everybody is. And some people tell lies to achieve that, some do scams or criminal stuff. Humans use tactics that "work" with humans, so what?
There's no law of nature from which follows that every person who curiously becomes famous for uncertain reasons can only be telling stupid things.
Discussing the person rather than their ideas is IMO a telltale sign that the subject (and gaining new insights about it) isn't really top priority here.
Ironic since nowadays Taleb seems to enjoy trolling bitcoiners.
Putting aside the weird trash-talking of status quo economists, in order to evaluate the correctness of his position, I would have to do way too much homework.
His prediction of human behavior under a deflational currency though does raise some flags. He says people will buy stuff regardless. If know I can use the same money to buy two cars next year instead of buying a car this year, I will not buy a car this year. He seems to say I will.
When I listened to the interview I didn't hear him say that.
My view on this: governments simply cannot help increasing debt to spend more on whatever purpose they deem right at a certain time. It's simply the easiest way (least opposition from voters) for them to enact their programmes. The only other option (cutting other spending to increase spending on what's current high priority) doesn't get them reelected.
> Putting aside the weird trash-talking of status quo economists ...
Yeah, I admit he does too much of that, not optimal. But that doesn't mean the message is wrong.
> He says people will buy stuff regardless.
You won't? If your car breaks down, you won't let it get fixed right now but next month because it's cheaper? If you're hungry today you'll wait till next week to buy food because it costs 0,005 % less? You'll wait 10 years to fly to Fiji because it'll be cheaper? Oh wow, you must be a special person then.
> If know I can use the same money to buy two cars next year instead of buying a car this year, I will not buy a car this year.
You sure? You just watch everybody drive around? Besides: same money, next year worth 2x is dramatically exaggerated. What are typical gains of efficiency through technological advances? Maybe 5 % per year? I say you're putting up a strawman here. With 5 % deflation you'll have 2x the buying power in ~ 14 years .. you're going to wait this long?
> He seems to say I will.
Nope, as I understood what he says, he just says it somewhat shifts time preference.
Which car? The one I don't have because I'm saving to buy two next year? You're changing the example I gave into something else entirely. If you're saying that drastically reducing or eliminating the purchase of everything that is not absolutely essential to have won't be bad for the economy, or if it is, it won't be bad for society in the long term -- then say that.
>> If know I can use the same money to buy two cars next year instead of buying a car this year, I will not buy a car this year.
>You sure?
Yes. (I lived someplace where there was a ridiculous price markup for electronic goods. I needed a new phone and laptop but I refused to buy them because of the ridiculous prices. Then the currency crashed a year later and I immediately bought them by exchanging US dollars before they could markup the prices or pause sales. I ended up getting them for less than the US price incidentally. Otherwise I would have waited until the old ones were preventing me from doing essential tasks. This is same for cars.)
"People consume because there's a limitless desire to consume" he says. And when Fridman calls him on it, he says yes well people economize due to constraints no matter what.
>same money, next year worth 2x is dramatically exaggerated.
Well yes that’s the point. aren’t we talking about a bitcoin economy in the end after all? If a transition from fiat to bitcoin standard starts happening, this is the path its going to take until the price stabilizes, no? People doubled their money in half a year in 2021 after all.
EDIT: his odd comment that he is migrating from anarchism towards supporting benign dictatorships doesn't exact endear him either.
So eventually you'll have two ... and what will happen? Yes, some time your car will need repairs. Will you have the repair done months later because it'd be cheaper then? Highly unlikely.
> If you're saying that drastically reducing or eliminating the purchase of everything that is not absolutely essential to have won't be bad for the economy, or if it is, it won't be bad for society in the long term -- then say that.
I think people would - as they always have been doing it - still spend money on things that aren't absolutely necessary. If not for mere hedonistic pleasure then for status or whatever.
>>> If know I can use the same money to buy two cars next year instead of buying a car this year, I will not buy a car this year.
>>You sure?
>Yes. (I lived someplace where there was a ridiculous price markup for electronic goods. I needed a new phone and laptop but I refused to buy them because of the ridiculous prices. Then the currency crashed a year later and I immediately bought them by exchanging US dollars before they could markup the prices or pause sales. I ended up getting them for less than the US price incidentally. Otherwise I would have waited until the old ones were preventing me from doing essential tasks. This is same for cars.)
You ignored what I read about the buying power doubling over not one year but rather fourteen years ... you're writing about "currency crashing" which is something completely different from a gradual steady deflationary currency.
> "People consume because there's a limitless desire to consume" he says. And when Fridman calls him on it, he says yes well people economize due to constraints no matter what.
What's the point? Of course people try to find a balance between spending now and saving, nothing new here.
> If a transition from fiat to bitcoin standard starts happening, this is the path its going to take until the price stabilizes, no? People doubled their money in half a year in 2021 after all.
Yes. But as with most such developments, there's the dynamics that you see at first glance (adoption grows --> people are more confident Bitcoin will become even more valuable --> demand increases --> price increases --> ...) and there's lots more secondary dynamics that will also happen and dampen the obvious dynamic (price increases --> too expensive for some --> demand decreases --> dynamic equilibrium). There's surely more such secondary dynamics and they're important.
> EDIT: his odd comment that he is migrating from anarchism towards supporting benign dictatorships doesn't exact endear him either.
Well, I'm not a fan of dictatorships.
I don't think it's a very useful heuristic to discard all ideas of some person because one doesn't share/like one or a few of their positions. You'd have to discard the positions of almost every person on the planet then, right?
There are several issues with tradFi. Pointing that out is like saying the sun will rise tomorrow. In some cases, people are working on a fix. In other cases, the inefficiency and criminal activity is not ceasing because the scale is too small for overburdened regulators to care about.
Not one of these uses bitcoin as a fix. Whoever is building it has almost never been in finance. They think tech bros can easily understand finance cos numbers! Except finance is extremely advanced. It’s like trying to join a full ML team after running a single random forest regression or something. The consequence of such hubris is sentences like this:
> Bitcoin is the solution to the fundamentally broken debt-driven economy.
The debt driven economy is by design. It’s not a fucking flaw like the hard money idiots listening to Peter Schiff daily want to believe. Sometimes it goes to excess and we get 2008. Doesn’t mean the older idea was better. There is no wealth distribution in a hard money paradigm that makes sense.
For simple terms since you’re obviously not in the field, ask yourself where is money created? If you say central banks, go back to Econ 101 and study better this time.