My analogy doesn't seem flawed to me- that's exactly what I meant:
1. printing a billion dollars should be approximately just as [in]significant to USD supply as the 30k BTC to the BTC supply in circulation; that's why I said a billion, but not a million or a trillion;
2. market fluctions over/undershooting any corrections is reasonable, but not exaggerating them by multiple orders of magnitude - it may react to a 0.1% change as a 0.2% change, but not as 10% change;
3. a market that's "functioning properly" would be expected to correct for so huge overexaggerations - if some people get a little silly from time to time, then the market should (and would) take their money from them; but if most of the people get very silly frequently, then that's not a properly functioning market.
Re:For Sale: 29,656.51306529 Bitcoins
by fancyketchup on Friday June 13, 2014 @05:05AM
(#7887933)
Well, the sort of obvious explanation is that amount of BTC in active circulation is much smaller than bitcoin proponents claim.
A few reasons why your analogy is flawed. First, M0 (which is one of the more conservative definition of money, is about 4 trillion, so the value loss from a billion dollars is not going to be anywhere near 10% to start off with). Secondly, by printing money you're again only affecting M0, but there are a lot of debt-based instruments that are probably better characterizations of "total money", but since they are debt-based it creates some level of 'springiness' to the total money supply.
Finally, it's not clear to me what you mean by 'functioning properly'. Even if a small change triggers a bigger effect (it will, these things are categorized by cascading effects) - Is the market coordinating individual values with prices? Probably, it is: it's just that the individuals' value systems have gone a bit out of whack in a spate of mania. But who are we to judge if people get a little silly from time to time?