I am always afraid to start a new thread on a serious topic
(but fearless about replying to other threads on serious topics
that others start) rather than start a thread on a humorous stopic

If moderators delete this post, that's fine. I may even delete it myself,
if it starts flame wars about emotional subjects.

Bill Maher made me cheer for him with his latest video on cryptocurrency.
https://www.youtube.com/watch?v=HaJpYjO136o

Of course, Maher will probably say something cringey, stupid, annoying, enraging,
in his next video about something, that misses the point of something,
or, rather, invite guests on to propagate bullshit, contrary to Maher
claiming to disagree with said bullshit.

The point Maher made, but weakly, is that just because banks, Wall Street,
are ponzi schemes & scams & frauds doesn't mean cryptocurrency/Bitcoin isn't.

I like that Maher emphasized the horrible consumption of electricity to do
Bitcoin mining.

I defend investing in physical precious metals: silver, gold,
especially after I watched a video of how physically hard silver mining is.
Proven money for 1000s of years.

My other criticism: I wish Maher would emphasize the difference between "real"
vs "physical". Mathematics, abstract mathematical theorems are real, but abstract.
Silver, gold, are real, but physical.
An example of a not-real physical: the Star Wars Universe, unobtanium, vibranium.
An example of a not-real abstraction: 1 + 1 = 3.

So while the fascinating mathematics behind crypto/blockchain is real & abstract,
& mathematical theorems & results have practical value adding to our knowledge,
it does not mean that cryptocurrency is attached to anything of real physical or real abstract value.

Hypothetical universe: imagine if all these machines doing cryptomining were instead
churning out mathematical theorems that were previously unsolved. And a value were assigned to that. THAT would be real value. But, just finding a number that satisfies
an elliptic equation: not so valuable.

I have never been good at math and investing, never understood the stock market, futures or commodities like precious metals either. Now comes all these crypto currencies and I am just as baffled with all the hype as well.

I have always followed my old rule of only investing in things that I truly understand. I have made lots of bad investments over the last 30 years, i.,e. I have bought and sold 9 homes since 1986, and only made a profit on 3 of them, while the other 6 I either lost small amounts or huge amounts of money, so I am no good at real estate either.

The only "safe" investments I have made in the last 30 years, were in WAM Projects, which eventually all paid me back with better rates of return than stocks or CDs.

If Messmaster or Soundguy want to float their own digital currencies, I would invest in that, because I know the people and I know the industry.

I don't trust stuff in "the cloud" because clouds tend to blow away and disappear.

MK

My biggest concern about cryptocurrency is that's billed at a currency AND a store of value.

I'm going to press X to doubt.

A store of value means that it will have the same purchasing power, or greater, in the future.

Currency is not a store of value, because inflation means a given sum of money will buy less each year. This is a feature, not a bug. Because with a modest amount of inflation, you're encouraged to spend that currency, either on goods and services or on investments.

If a currency is maintaining, or gaining, purchasing power over time (a given quantity can buy more later than it can today), then the last thing you want to do is spend it now.

This is why deflation is a bigger problem than inflation.

Suppose you want to buy a car, for 20K. Every year you wait the price goes up 2.5%. You should purchase sooner than later.

Now, suppose instead the price falls 2.5% every year. Well, you can save money by waiting a year, or you can get a more expensive car if you wait long enough.

The second scenario is what's happening with cryptocurrency. If you have a 20k equivalent, yes, you could run out and buy a 20k car right now. But if you wait a year, you might be able to get that 40k car you'd rather have, but is right now out of your price range. But if cryptocurrency keeps increasing in value, you can just wait a little longer to get the 80K you only dreamed of getting.

On paper, it sounds great. The problem is by delaying the purchase, you're reducing economic activity. A small percentage of people doing that is less than a rounding error, but if enough people do that, congratulations, you have entered a recession.

Keynes argued that money was a store of value, and he also was of course aware of the existence of inflation. Is your preferred formulation of "store of value" more appropriate? What advantages does this formulation have that would persuade a naive or disinterested listener to buy into it?

Executive Summary of Bill Maher's rant: "Old Man Yells At Cloud"

Alternate version: "I missed the boat on this so fuck everyone who didn't"

Fact: the overwhelming majority of US dollars represent NOTHING. They were created out of thin air as consumer and commercial DEBT, much of it (hundreds of TRILLIONS) bundled up in over-leveraged tranches of marginal real estate loans, junk bonds, and commodity futures. That "money" does not exist. It's a fairy tale. It's just numbers in a database.The main difference between USD and BTC is that USD is backed by nuclear weapons. Other countries agree to whatever value the US government assigns to it because they don't want to be turned into a glass parking lot. That's pretty much the basis of our economy.

FYI, 95% of all Bitcoin mining occurs in data centers in China where the power is government subsidized. It hasn't been profitable with US power prices in half a decade. Also, a large amount of Bitcoin transactions involve Chinese oligarchs moving their wealth the hell out of China

P vs NP might have something to say about that. The reason cryptomining works as a measure of value is it's difficult to solve but easy to verify it's solved. Sort of like a big sudoku puzzle. It'll take a while to solve a sudoku puzzle but once all the numbers are in place, you can easily tell it's the correct solution.

But distributed computing absolutely has been used for useful mathematical and scientific discoveries. Look at Folding@Home or GIMPS (Great Internet Mersenne Prime Search) and others. These problems are more complicated in that they're hard to solve and hard to verify.

Aside from fundamental structural differences between cryptomining and scientific research, GIMPS and the like are driven by human curiosity, not greed. Attaching a monetary value changes the motivations from discovery to profit and all the baggage that comes with it. Hell to the no.

(Upfront disclosure: I hold no crypto and never will.)

Money is a token of purchasing power in exchange. So long as it possesses that power, it "exists" in the only relevant sense at issue. We can point to various features of the currency that ground the convention that links the tokens with its powers in exchange over time -- e.g., basis in metals during the Victorian era, fiat today. You can then cast doubt on whether those powers exist -- e.g., in the Victorian era, you could prove that most coins in circulation were counterfeit; or in the modern day, you could prove that America is in danger of imminent collapse (i.e., not decline, but collapse). But once you admit that those powers are active, you can't coherently deny the money exists.

I mine etherium everyday on my gaming rig I use my graphics card which is an AMD Radeon RX 5700 XT , I treat it like an investment only it costs me pennies to due. I run my Miner when ever i'm not actively gaming on my rig , The hashed etherium is stored in my E wallet when i want to cash it in i can turn it into real money. I don't have much about 300 dollars worth depending on the price , As for right now its not a good time to buy etherium as you wont get much cause its price is high. Its like the stock market i'm mining digital currency that i can Then sell for real money just the way you buy stocks and then sell them when they are worth more Same principle Main difference is that your stock is tied to a company and its price is dependent on how well that company is doing Etheriums price is set a different way.

Now about bit coin , sigh , there are no bit coin farms not any more, the reason why is that there are no new coins to be mined IE no new cyphers to be solved, you can still buy and sell bit coin but there are no more coins to be mined so most people myself included due etherium or any of the other cryptos. The cost is not that bad I have only seen my electric bill go up by a few cents since i started actively mining. Now if you had say 6 or 7 cards mining then Yes you would see an up tick in your electric bill BUT what you would make off those miners would easily cover your increase in cost I have a friend who Literally pays his rent with his miners each month he pulls in around 1k to 1.5k worth of Etherium It can be very profitable if you manage your costs. Your high cost these days is getting the Graphics cards to mine with as everything Tech related jumped in price with these supply shortages. Just to give an idea My current gaming rig which is 1 year old cost me around 1.2k US dollars when i built it, the components are now worth over 3k right now. It is this reason I don't recommend getting into mining Crypto right now as your start up costs are going to be very high.

Excellent post. I summarized it for you.

Agreed. Totally, re: US dollars.
Still not an argument for cryptocurrency.
Also, just shoving power centers from USA to China doesn't solve the electricity generation problem, unless China generates more of its electricity from solar and wind than the USA. If not, then shifting the problem to China only makes Bitcoin worse.

So, still not hearing any argument defining how Bitcoin is "better" than US dollar
or "more based on reality".

Before the 1980's, target inflation was about 2%, and bank savings return rates were about 8%. This was balanced with astronomical, by today's standards, by mortgage rates that were closer to modern credit card rates, 20-25%.

However, since then, bank savings return rates have fallen to about 0.5%, which is why you can get mortgages for 5-6%.

So, when Keynes said that, at that time, it was correct. Monetary theory has changed since then.

Alternatively, a lot of countries keep a lot of reserves in US dollars. That's one major reason the USD is relatively stable.

However, there are early warning signs that hyperinflation for the USD may be looming on the horizon. This is based on events that we are starting to see in the US that, in countries that experienced hyperinflation, happened a couple of years prior to their currency experiencing hyperinflation. It's too early to sound the alarm bells just yet, but people are keeping an eye on things.

Most other countries that have seen hyperinflation either became Zimbabwe and/or Venezuela, or just canceled their currency and started again.

Be that as it may, people seem to be happy to call a stable currency a store of value. Investopedia, for instance. (https://www.investopedia.com/terms/s/storeofvalue.asp) If I were to write them a complaint on your behalf, what would the email look like?

Soundguy: [The main difference between USD and BTC is that USD is backed by nuclear weapons. Other countries agree to whatever value the US government assigns to it because they don't want to be turned into a glass parking lot. That's pretty much the basis of our economy.]

Countries are free to re-start with whatever currency they're not.
And I prefer to think they are.
But if they're not, then they are justified in killing anyone who tries to stop them.
And I have no obligation to agree with this shit that just because they're in the military
that they're "fighting for my freedom or my country". Anybody can claim that.
Unfalsifiable unscientific untestable garbage. ALL prisoners are prisoners of war.

Those who do not think critically
think that getting lucky gambling makes gambling a "wise" investment.
NEVER addressing ALL THE LOSSES in the past.

From the link:

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A store of value is essentially an asset, commodity, or currency that can be saved, retrieved, and exchanged in the future without deteriorating in value. In other words, to enter this category, the item acquired should, over time, either be worth the same or more.

-----------------------------------------------------------------------------------------------------------------------------

$100 in 2021 is not that same as $100 in 2019. According the the US Inflation Calculator (https://www.usinflationcalculator.com/) $100 in 2021 is worth 96.52 in 2019. So how has the USD retained it's value? Over 2 years, the dollar has lost nearly 4% of it's purchasing power. Now take that over the course of a working life, roughly 50 years. At 2% inflation a year, over 50 years, the same $100 would have about 37% of it's purchasing power.

Now, compare that to the S& 500, which averages 8-10% a year over the past 100 years. If inflation remains at 2%, that would be an adjusted growth of +6-8%. Bear in mind, the average comes from averaging the per-year growth rate. Rarely does the S& 500 actually grow between 8-10% in any given year. The growth rate for any given year can be far beyond 10%, or it can actually lose money from one year to another.

Back to the USD.

The statistic referenced above assumes your version of saving is stuffing extra money in a mattress. What if you have an interest-bearing account? The national savings interest rate is 0.05%. Off of $100, that would net you about $0.50. Inflation is lowering your purchase power by about $2 per 100, per year, so you're still in the hole by about $1.50.

So, if you want to copy and paste this post as the complaint letter, go for it.

It does seem pretty inconsistent of them to include currency, but then also to define store of value as being something that doesn't depreciate. Strange stuff.

(Personally, I prefer to define "store of value" in a way that is indexed to the relative stability of purchasing power, not absolute non-deterioration. If a stable currency isn't a store of value, nothing is.)

These definitions are meaningless. If these economists had brains, they would think like math PhDs, and define things ONLY in terms of FUNCTIONAL PROPERTIES. e.g. if you can exchange a thing for another thing, then it's currency.

Call it a "store of value" or don't. Doesn't fucking matter. Except that "store of value" has an unfortunately POSITIVE connotation that CAN mislead people. "Currency" is more neutral. "Currency" is like a tool, like a hammer, like math, like science, like engineering.
Doesn't specify what it's used for.

thanks for the TL:dr... errr, TL:dw?? (too long, didn't watch!)

as a young child, i was intrigued why certain pieces of paper was greater in worth than the pakage of 100 sheets of paper that i used in school. And how the burning properties were quite similar?

I was still a child when USA tv showed a mini-series called "the day after" (commoners doing there best after USA & USSR exchange nuclear weapons)

There is A LOT of paper in libraries all over the world, but paper is not very nutritious (but i suppose if you burn it, it might keep you warm in the winter?) One comment that i found interesting: what happens if/when the cloud blows away?

I was in Japan in March 2011 (a decade ago now... one of the tsunamis that caused widespread destruction) and that renewed my interest in doomsday preparations. In the future, another "carrington event" probably won't be as disruptive to normal life now, just as it was only a limited phenomena in 1859???

And as i refreshed my recollections of CME's it appears that any of you who might watch Sky One might have seen COBRA (some kind of fictional drama about exactly this sort of thing?)

Sorry... i suppose i'm hijacking this thread just a bit?

Your remark about functional properties is right, I think. Any asset could function as a currency in a sufficiently weird world, assuming there was a convention to use it to mediate exchange, and that convention was grounded and stable.

The rest of your remarks sound false.

(1) The definitions are meaningful insofar as a difference between them has practical and theoretical consequences; and saying some asset is a store of value has the consequence of making it easier to adopt as a currency, all other things equal. We WANT any decent currency to store value -- that is one of the properties that make any given asset worth choosing as a currency. So what I dispute is the idea that it must be a **perfect** store of value, i.e., free of all depreciation. The reason I reject that formulation is because all assets depreciate in value, including real estate and even precious metals, and that fiat currency is no different in that respect. So, if nothing is a store of value, then that starts to look like the choice between adopting one asset or another as currency (say, paper money vs. precious metals) is arbitrary. But it is not arbitrary. So, hey, why not just accept that it's useful to talk about how things mean things?

(2) Contemporary economics is entirely mathematical, and that is part of the problem with it. Too much garbage thinking gets dressed up in numbers, leading people to just repeat the scraps of knowledge they can get like slogans, because there's nothing else to hang onto. But that's devastating. A mature science is one that is responsive to data and evidence, and which does not shrink from difficult and interesting questions related to it.

Formal mathematical modeling of economics IS one of the BEST, the GREATEST redeeming values of economics: giving FORMAL QUANTIFIABLE definitions to variables.
Otherwise, anybody can just make up any bullshit story they want and claim it to be true,
about what caused this depression or this bull market etc
Anything is consistent with UNFALSIFIABLE UNQUANTIFIABLE bullshit.
Or inconsistent. That's what unfalsifiable means.

The problem is the billion economists spouting their opinions out there with ABSOLUTE CONVICTION and ZERO formal DEFINITION of CAUSATION: arbitrarily choosing WHO
in a chain of interactions "caused" something to happen. And millions of mentally inferior
listeners just cheer these loud ARROGANT SMUG talking heads UNCRITICALLY,
NEVER looking at the DATA of ALL their FAILURES and SUCCESSES,
cherrypicking ONLY the successes.

It's too bad you think numbers are magic, because they're not. People lie with them all the time. Also, that's not what falsifiable means.

It's too bad you think I think numbers are "magic", as that is literally EXACTLY the OPPOSITE of what I said.

I'm getting the sense you didn't get what I meant in saying that, which is: they're not magically able to overcome human distortion, lies, or bullshit. It's a "garbage in, garbage out" kind of situation. Fetishizing the objectivity of math is deeply misguided.

Obviously, how and what you mathematically model is of supreme importance.
THAT IS PART OF MATHEMATICS. THAT IS THE ACTIVITY WE CALL "mathematics".

But LYING is MUCH more EASILY done with just endless STORIES and NARRATIVES in PROSE form.

This is slightly more plausible, but I don't know if it's right. People absolutely lie with numbers. Hypermasculine men, especially (though not uniquely) are -- for some reason -- especially ripe suckers for stupid shell games. 2008 happened in part because a "herp-a-derp, here's some numbers" attitude prevailed, and still prevails.

What I would say is that prose and math both serve lies equally. And both also serve bullshit, to a degree. The difference, maybe, is that the bullshit is obvious with prose, and less obvious with math.