Krugman on Bitcoin

[Spock]

while many dislike zerohedge, this was an interesting rebuttal of Krugman's opinion
(and the Krugman meme pics are funny).
https://www.zerohedge.com/news/2018-08-04/memo-krugman-7-problems-cryptocurrency-solves

 

[copyright1997reloaded]

Why don't we try just staying on topic, which is the virtues of bitcoin, as expressed by Mr. Krugman.

OK, so staying on topic....I read the article, and was struck by this tidbit:

If you like, fiat currencies have underlying value because men with guns say they do. And this means that their value isn’t a bubble that can collapse if people lose faith.

A fiat currency only has value because of trust. Venezuela is a perfect example of when trust in the buying power of the currency goes away. The "men with the guns" can say it has value, but that is meaningless if the people lose faith.

Crypto currencies calling card is in great extent found through decentralization and getting away from single party (single country) control of captial, i.e. moving from the men with the guns saying so. Whether it will be successful at that remains to be seen (I am somewhat skeptical even though I have a modest amount of Bitcoin & Bitcoin Cash).

 

[fosterscik]

Bitcoin and other cryptos have a long way to go IMHO before they are usable by the average man in the street. The lack of oversight is touted as a plus by many but its the wild west out there. I thought this WSJ article yesterday was informative:
https://www.wsj.com/graphics/crypto...big-coin/?mod=article_inline?mod=hp_lead_pos5

Dozens of trading groups are manipulating the price of cryptocurrencies on some of the largest online exchanges, generating at least $825 million in trading activity over the past six months—and hundreds of millions in losses for those caught on the wrong side, according to a Wall Street Journal analysis.

I know not all can read this but if you can its informative. It describes the pump-and-dump operations coordinated by groups using telegraph.

Until this is corrected some how (i.e. regulated) it's hard for me to see how cryptos can become mainstream and hold their value

 

[flintnational]

Dang, I was going to buy some bitcoin! But, those that have it won't sell me any. To quote one seller I contacted, "The USD is obsolete and soon to be worthless. Why would I want your stinky paper fiat money?". Who knew? Man, missed another sure thing.

Do you think the people on TV that sell gold will take my USD? On second thought, I doubt it. They also say my stinky paper fiat money will soon be worthless.

 

[NYEXPAT]

while many dislike zerohedge, this was an interesting rebuttal of Krugman's opinion
(and the Krugman meme pics are funny).
https://www.zerohedge.com/news/2018-08-04/memo-krugman-7-problems-cryptocurrency-solves

Nice piece, thanks for posting!

 

[GravitySucks]

Ask Venezuela what they think of their fiat currency. Bitcoin for them is remarkably stable.

It's a complex domain, and we're slowly entering the disappointment phase. Once regulation kicks in in addition we'll see what the staying power is.

My current guess is that we'll end up with bits and pieces of the technology, and maybe one or two coin(types), everything else will disappear in a puff of logic.

Cryptokitties for example, the biggest application for ETH and a sort of Pokemon collectible card game, has collapsed in recent months. Bitcoin itself is sort of holding up, to my own surprise.

In preparing for a Venezuela scenario, I'd rather gold, silver, and real estate than crypto.

I can't pay my health insurance, real estate taxes, or grocery shop with bit coin. Gold is easy to sell in a medium sized city for a relativly low spread.

I know of one person who made a legal transaction with Bitcoin... Not that I know everyone
One person on here who made a quasilegal Bitcoin purchase of prescription drugs in the US from a European vendor.
One person that bought illegal drugs with Bitcoin....
Not a great endorsement.
If you think the me with the guns are not going to shut down cryptos if the dollar tanks and that's the common safe harbour people flee to than I believe we disagree.

 

[Texas Proud]

In preparing for a Venezuela scenario, I'd rather gold, silver, and real estate than crypto.

I can't pay my health insurance, real estate taxes, or grocery shop with bit coin. Gold is easy to sell in a medium sized city for a relativly low spread.

I know of one person who made a legal transaction with Bitcoin... Not that I know everyone
One person on here who made a quasilegal Bitcoin purchase of prescription drugs in the US from a European vendor.
One person that bought illegal drugs with Bitcoin....
Not a great endorsement.
If you think the me with the guns are not going to shut down cryptos if the dollar tanks and that's the common safe harbour people flee to than I believe we disagree.

One problem with crypto is that if we get as bad as the survivorlists say then there will not be any place that will be able to read your crypto.... heck, the computer that holds it will probably be destroyed...


I still shake my head at all the people that keep talking this up...

 

[ncbill]

One problem with crypto is that if we get as bad as the survivorlists say then there will not be any place that will be able to read your crypto.... heck, the computer that holds it will probably be destroyed...


I still shake my head at all the people that keep talking this up...

Seems a pretty good investment if you're the one starting up a new crypto-currency that you then manage to hype like a penny stock.

 

[Totoro]

In preparing for a Venezuela scenario, I'd rather gold, silver, and real estate than crypto.

I can't pay my health insurance, real estate taxes, or grocery shop with bit coin. Gold is easy to sell in a medium sized city for a relativly low spread.

It's harder to get robbed (gold, silver) with crypto, and the government can claim your houses and/or tax its value away.

Not saying it is the be-all end-all, I'd go precious metals or foreign currency too for day to day transactions and living. Hope the nightmare ends for them soon.

 

[MichaelB]

In preparing for a Venezuela scenario, I'd rather gold, silver, and real estate than crypto.

Wouldn’t help much. No form of currency - crypto, fiat or hard asset, is of value in a lawless state where fundamental property rights do not exist.

Based on reports from friends and family, the most desirable currency now in Venezuela is food.

 

[copyright1997reloaded]

I find some of the post here kinda ironic. Any asset class that isn't traditional is essentially laughed at. I find it ironic in that people who are poor or struggling to have enough to retire should/need stay with traditional, proven techniques. But once you have enough, it gives you the freedom to further diversify.

Now that I know I have enough, I have:
1. Bought some precious metals (Gold, Silver). Some in ETF form, some in physical form.
2. Bought land, with enough trees to keep the house heated if needed.
3. Made sure I have a good food supply, of which some is canned and some is in long term (Mylar sealed) containers. (BTW, although I am not LDS, the LDS Home Storage Centers are an excellent source for some of the basics).
4. A good supply of Ammo.

Did I do these things because I think the world is going to end tomorrow or because the United States will be in chaos next week? No, but I did do these things as a small hedge against that low probability event. (It is a different story as to whether I would want to be around if it happened...)

I put Bitcoin in this category. I bought a small amount a few years ago ($100) and promptly forgot about it, it is now worth around $3500, enough to keep me interested.

 

[truenorth418]

In Nov 2016 this guy Krugman said the stock market would crash and never recover. Virtually at that moment the S&P 500 began a year long 20% + climb. Why trust him? Maybe he is right this time, or maybe not, but I would not waste my time listening to him ever again.

 

[Texas Proud]

I find some of the post here kinda ironic. Any asset class that isn't traditional is essentially laughed at. I find it ironic in that people who are poor or struggling to have enough to retire should/need stay with traditional, proven techniques. But once you have enough, it gives you the freedom to further diversify.

Now that I know I have enough, I have:
1. Bought some precious metals (Gold, Silver). Some in ETF form, some in physical form.
2. Bought land, with enough trees to keep the house heated if needed.
3. Made sure I have a good food supply, of which some is canned and some is in long term (Mylar sealed) containers. (BTW, although I am not LDS, the LDS Home Storage Centers are an excellent source for some of the basics).
4. A good supply of Ammo.

Did I do these things because I think the world is going to end tomorrow or because the United States will be in chaos next week? No, but I did do these things as a small hedge against that low probability event. (It is a different story as to whether I would want to be around if it happened...)

I put Bitcoin in this category. I bought a small amount a few years ago ($100) and promptly forgot about it, it is now worth around $3500, enough to keep me interested.

But you just made the point that bitcoin is NOT an investment... you risked a whole $100 on it... I doubt that would move the needle any vs your whole assets...


So let's compare... how much did you invest in precious metals, land, food and ammo... you can use pcts if you want...


BTW, I do not laugh at metals or land... those are strong known investments that some just choose not to buy... I am not into long term food options since at some time you will either have to eat it or throw it away... and I do not think it tastes good... but you can get some use out of it... with crypto there is no real utility to it...

 

[Teacher Terry]

With bitcoin we invested what we were prepared to lose to see how it worked out and got lucky and made money. I don’t think anyone is arguing that it should be your main investment strategy or plan.

 

[flintnational]

I think Ben Graham would say bitcoin is speculative and not an investment. Here is his explanation of the difference between the two.

“An investment operation is one which, on thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”

Cryptocurrencies, unlike most stocks and bonds, do not have a "return". The purchaser is speculating the price will be higher in the future. Graham goes on to propose situations where "intelligent speculation" might be warranted.

"Intelligent speculation presupposes at least that the mathematical possibilities are not against the speculation, basing the measurement of these odds on experience and the careful weighing of relevant facts."

IMHO, cryptocurrencies don't meet the definition of an investment or an intelligent speculation. I would put them clearly in the gambling category.

 

[Texas Proud]

With bitcoin we invested what we were prepared to lose to see how it worked out and got lucky and made money. I don’t think anyone is arguing that it should be your main investment strategy or plan.

See below... I do not think anybody has suggested it be a main strategy or plan... but I do not think it is even an investment...



If you want to throw play money at it and hope for the best, that is fine.. it is speculation, or hope, or whatever word you might want to use but it is not an investment strategy.... also, if you are not putting in 5% of your money then even you are not sold on it either... less than 1% of your money will do nothing for your total return...


I would throw art and classic cars into that also... there are a lot of rich people who have made a lot of money speculating in these items, but IMO it is still a gamble... and I would rather be in these than bitcoin...


The run up and sell down has been very quick... from Nov to Dec going up and since then going down... it seems to be settling down a bit, but I think it will continue to fall...

I think Ben Graham would say bitcoin is speculative and not an investment. Here is his explanation of the difference between the two.

“An investment operation is one which, on thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative.”

Cryptocurrencies, unlike most stocks and bonds, do not have a "return". The purchaser is speculating the price will be higher in the future. Graham goes on to propose situations where "intelligent speculation" might be warranted.

"Intelligent speculation presupposes at least that the mathematical possibilities are not against the speculation, basing the measurement of these odds on experience and the careful weighing of relevant facts."

IMHO, cryptocurrencies don't meet the definition of an investment or an intelligent speculation. I would put them clearly in the gambling category.

 

[Cessna152]

"Intelligent speculation presupposes at least that the mathematical possibilities are not against the speculation, basing the measurement of these odds on experience and the careful weighing of relevant facts."

IMHO, cryptocurrencies don't meet the definition of an investment or an intelligent speculation. I would put them clearly in the gambling category.

Your assessment fails to take into account that Bitcoin is already being used as currency, and not just being traded between gamblers. This site claims to list some of the better-recognized companies that accept Bitcoin as a currency:

Who Accepts Bitcoins As Payment? List of Companies, Stores, Shops
https://99bitcoins.com/who-accepts-bitcoins-payment-companies-stores-take-bitcoins/

Fidelity also disagrees with your assessment:

How Big are Fidelity's Bitcoin Ambitions?
https://www.barrons.com/articles/how-big-are-fidelitys-bitcoin-ambitions-1528319120

Under CEO Abigail Johnson’s leadership, Fidelity was one of the first institutions to give the nascent cryptocurrency asset class a serious look.
“I’m a believer,” she said at a cryptocurrency industry conference last May. “I’m one of the few standing before you today from a large financial services company that has not given up on digital currencies.”
Full story:
https://www.ccn.com/breaking-fidelity-is-quietly-building-a-cryptocurrency-exchange/

 

[flintnational]

Your assessment fails to take into account that Bitcoin is already being used as currency, and not just being traded between gamblers. This site claims to list some of the better-recognized companies that accept Bitcoin as a currency:

Who Accepts Bitcoins As Payment? List of Companies, Stores, Shops
https://99bitcoins.com/who-accepts-bitcoins-payment-companies-stores-take-bitcoins/

Fidelity also disagrees with your assessment:

How Big are Fidelity's Bitcoin Ambitions?
https://www.barrons.com/articles/how-big-are-fidelitys-bitcoin-ambitions-1528319120

Under CEO Abigail Johnson’s leadership, Fidelity was one of the first institutions to give the nascent cryptocurrency asset class a serious look.
“I’m a believer,” she said at a cryptocurrency industry conference last May. “I’m one of the few standing before you today from a large financial services company that has not given up on digital currencies.”
Full story:
https://www.ccn.com/breaking-fidelity-is-quietly-building-a-cryptocurrency-exchange/

1) Currencies don't meet Graham's definition of an investment either.
2) The Johnsons are in the business of making money providing services their customers want. Of course she believes in bitcoin (at a percent to Fidelity).
3) A gamble does not mean you can't make money. It just means bitcoin does not fit any reasonable definition of an investment anymore than going into a casino is an investment.

 

[copyright1997reloaded]

But you just made the point that bitcoin is NOT an investment... you risked a whole $100 on it... I doubt that would move the needle any vs your whole assets...


So let's compare... how much did you invest in precious metals, land, food and ammo... you can use pcts if you want...


BTW, I do not laugh at metals or land... those are strong known investments that some just choose not to buy... I am not into long term food options since at some time you will either have to eat it or throw it away... and I do not think it tastes good... but you can get some use out of it... with crypto there is no real utility to it...

I have about 1.5% of the overall net worth in precious metals. Bitcoin is simply enough to keep me interested, about $4K worth at current prices. But I am considering buying more as it successfully tested a double bottom around the $6K/coin level.

Regarding the food, I've taken a somewhat different approach on most of it:
a) I have a bunch of freeze dried meals, the type you use for overnight hikes. Mostly Mountain House brand. Since I hike, I can slowly rotate through the stock.
b) I have a bunch of basics: dried beans (Northern, Pinto, etc), pasta's, sugar, pop corn, etc. Some of this I acquired at the LDS facility, other from places like Costco. I took the 50# bags and made smaller amounts in Mylar sealed w/oxygen absorbents, which I then stored in bins and also in Gamma seal buckets. So, this isn't just a bunch of crappy high salt meals.
c) I do have some of the more traditional stuff which I will eventually either eat or more likely toss in another 10-20 years.

Basic food ingredients are re-markedly cheap in bulk. The biggest expense is animal proteins, of which I don't eat a lot of.

 

[Teacher Terry]

The other thing is my son had a plan to mine it, was very knowledgeable and we mined 4 years ago when profitable. It also was a lot of work for him, knowing which coins to mine which was constantly changing, which coins to cash out, etc. Plus we were all aware we could loss the small amount we invested in it. Definitely not a good long term plan.

 

[Texas Proud]

I have about 1.5% of the overall net worth in precious metals. Bitcoin is simply enough to keep me interested, about $4K worth at current prices. But I am considering buying more as it successfully tested a double bottom around the $6K/coin level.

Regarding the food, I've taken a somewhat different approach on most of it:
a) I have a bunch of freeze dried meals, the type you use for overnight hikes. Mostly Mountain House brand. Since I hike, I can slowly rotate through the stock.
b) I have a bunch of basics: dried beans (Northern, Pinto, etc), pasta's, sugar, pop corn, etc. Some of this I acquired at the LDS facility, other from places like Costco. I took the 50# bags and made smaller amounts in Mylar sealed w/oxygen absorbents, which I then stored in bins and also in Gamma seal buckets. So, this isn't just a bunch of crappy high salt meals.
c) I do have some of the more traditional stuff which I will eventually either eat or more likely toss in another 10-20 years.

Basic food ingredients are re-markedly cheap in bulk. The biggest expense is animal proteins, of which I don't eat a lot of.

Thanks for the info... yes, 1.5% is a decent amount for metals even though some say to hold more... but it is not a fad for you... plus you said you have land, also not a fad...


OK, I can see that with the food... we do rotate through food stuff... my longer term storage is protein... I buy it cheap, seal it and freeze it... even though they say 1 year, I have had steak that was over 2 years old that was great tasting (I buy prime)... we usually buy big bags of some other stuff, but DW has slowed down a bit on that... I think she does have the Mountain House stuff as she has gone hiking for a few days before, but has not done that for a few years now...

 

[OldShooter]

Your assessment fails to take into account that Bitcoin is already being used as currency, and not just being traded between gamblers. ...

And why would you think that people currently accepting bitcoin are not gamblers? Today it is down 7%, so unless they moved fast to ditch the bitcoin they received yesterday, their profits on yesterday's transactions are probably gone. And if they instantaneously received and then ditched it, that makes it pretty clear that they actually do not believe in the currency at all.

The problem is this: An important use of a currency is as a store of value. I can accept a properly managed currency today, put it in my wallet, and be confident that tomorrow it will be worth the same as when I accepted it. Currencies can be mismanaged, of course, with Maduro and Mugabe as recent poster children. But a currency that has no management at all and no intrinsic value certainly should be at least suspected as not being a stable store of value and probably should be avoided by all but the gamblers.

 

[nvgs123]

Lots of talk about pros/cons of Bitcoin when I think the better argument is the vast potential of blockchain technology...
I've invested nothing in either yet.
However as my knowledge of blockchain technology grows...I'm getting more and more comfortable to invest about 25K into assets that are exploiting it's seemingly endless uses.

 

[Totoro]

Investing in blockchain technology is like investing in HTML. It's a protocol, and in contrast to HTML not even standardized.

 

[imoldernu]

Not very important in the scheme of things, but,

https://www.ccn.com/43-billion-wiped-out-of-crypto-in-5-days-as-bitcoin-price-rebounds/