BitCoin Seen Through The Eyes Of A Central Banker

Tyler Durden's picture

To us, the ECB's superficial, amusing take on BitCoin was merely a source of (Friday) humor.  To others, such as Tuur Demeester, the ECB's report on "Virtual Currency Schemes" which was merely a confused attempt to validate the Euro by bashing a prototype electronic currency that others have written far more informed articles on, has far more profound insights into central banker mentality. We are skeptical: the ECB has far more existential issues to worry about than whether people will be paying for that house in Calabria with BitCoin (they won't; at least not any time soon), such as how fast until Spain and Greece run out of rehypothecatable and repoable assets, that allow the ECB to continue creating its own version of electronic money (in this case named Euro) out of thin air. But for those seeking more than what meets the central-planner's eye (because what better ploy than to divert attention from where it truly needs to be focused: such as Spanish bonds for example getting a 0% haircut instead of 5%), here are some answers to the question whether "the CB’s toolbox have what it takes to contain a private, decentralised cryptocurrency? Or: Bitcoin seen through the eyes of a central banker."

From Tuur Demeester: "The Gloom Of Central Banking"

On october 29th 2012, the European Central Bank published a 55-­?page report titled “Virtual Currency Schemes”. With 183 references in the text, it seems obvious that specifically the fast growing peer to peer currency Bitcoin is under scrutiny.

 

Why in the world, one wonders, would an increadibly powerful financial institution bother to investigate what seems to be nothing more than a complex mathematical puzzle with which a bunch of whippersnappers send packages of bits and bytes back and forth to each other?

 

In what follows, I sketch an evolution of how central banks—the monopolists of the current fiat money paradigm—have dealt with the existence of online free market competition since 1996, and how they are now reacting to the sudden appearance of an enigmatic rival.

 

It turns out not only the ECB but also its more powerful and sophisticated Swiss godfather, the Bank for International Settlements, finds that it has genuine reasons to be on high alert.

 

Be warned that this is a subjective take on the issue. People from central bank and government circles will no doubt accuse me of being unbalanced and unfair in my interpretations and conclusions. So be it. My goal here is to scrape off the veneer of these reports and thus catch a glimpse of what may actually be happening behind the closed doors of Basel and Brussels.

Full report (pdf)

 

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ultraticum's picture

A whiff of freedom in the air!

knukles's picture

Private and digital...
Where have I heard that before?

Want it in my hand away from the maw of the Leviathan

(shit's worse than some forms of paper gold... sure, nobody's ever gonna mess with the code... my ass... nothing on systems is secure anymore...)

CH1's picture

Don't be brain-locked; any tech that advances liberty is of value, and Bitcoin is definitely among them.

blunderdog's picture

It's a common trait of humans: anything one doesn't understand is frightening and evil.

Neophiles (~5% of the species) vs. neophobes (~95%). 

We created religion because tomorrow is *always* threatening.

malikai's picture

I don't think there's anything wrong with folks being skeptical. I was very skeptical of BTC when I first found out about it. I still have some skepticisms/concerns, but none of them have been discussed here yet. Anyway, people who deserve to know will find out the truth for themselves. Everyone else can sling poo until they are forced to know.

No bother to me.

Half_A_Billion_Hollow_Points's picture

I stopped stacking barbarous relics for a while when I finally understood how (paranoid-level) secure bitcoin is: 

i) it starts with public-key cryptography, so it works like this: you have both a private key and a public key.  It's like latitute & longitude, you tell everyone the longitude you are, but nobody knows the latitude (and the space of possibilities is as vast as the number of atoms on Earth, forget about finding it).  You receive bitcoins when someone tells the network that "I'm at longitude x, sending 1btc to whomever is at longitude y".  

BUT it doesn't stop there!  It still has another layer of security on top of that.

ii) You don't even tell anyone the longitude you are! They use a "hash function", which is basically a huge unique barcode, to hide the "public" longitude (public key).  So basically messages are like this:  "I'm at longitude x, sending 1btc to whomever has this crazy unique barcode for some longitude".  

 

This is why, for example, if you have 1000 btc and send 1btc to Benny Bernanke, it actually creates two transactions: 

Transaction #1:  "I'm at longitude x, sending 1btc to whomever has this crazy unique barcode for some longitude".  

Transaction #2:  "Oh, by the way, now that you know my longitude x, I'm sending all the other 999btc to this crazy unique barcode for some longitude where I'm hiding my btc.  By the way fuck you moneyprinters, and fuck you too-big-to-fail, and fuck your totalitarian financial oppression".  

I wish I could send some bitcoin to William Banzai.

malikai's picture

I'm just going to air my suspicions that some of the TDs themselves are probably looking closely at and contemplating picking up BTC. I'll bet that within six months you'll be able to donate in BTC here.

aphlaque_duck's picture

I would donate 10 BTC to 0H right now if they'd set this up.

Muppet of the Universe's picture

Why don't we just have the number of dollars in circulation be set with a ratio to population, and have that set ratio never be changed under penalty of death?  It seems pretty simple to me. 

 

I mean if the general population is too stupid to do what I've just said above, what makes you think they are capable of choosing a alternate, legitimate source of exchange? 

& I don't care how much you encrypt a code, those with the power to change the code- those who wrote it, have all the power, and it corrupts absolutely.  Moreover, being as none of you are high level hackers or programmers, its a little bit odd that you are commenting on the tech.  & my assumption is that if you did, you would have a vested interest in seeing it go into place, especially if it were hackable, b/c this would lead to a new ruling hacker class. 

Lastly, nothing is uncrackable.  Everything that you can imagine, can be accomplished.  We just haven't figured it out yet.

malikai's picture

"Why don't we just have the number of dollars in circulation be set with a ratio to population, and have that set ratio never be changed under penalty of death?  It seems pretty simple to me."

Feel free to get started with that. Until then, I'll stick with what I know works.

"I mean if the general population is too stupid to do what I've just said above, what makes you think they are capable of choosing a alternate, legitimate source of exchange?"

The general population follows. They do not lead.

"I don't care how much you encrypt a code, those with the power to change the code- those who wrote it, have all the power, and it corrupts absolutely."

You should try to learn how open source software works. It will help you understand this better.

"Moreover, being as none of you are high level hackers or programmers, its a little bit odd that you are commenting on the tech."

As an admin/developer/many other hats kind of guy for many years, I can see clearly that you're talking out of your ass. Stop. It's not working.

"Lastly, nothing is uncrackable.  Everything that you can imagine, can be accomplished.  We just haven't figured it out yet."

I look forward to seeing you figure it out, owning the world, and getting all the chicks. Keep me in mind when you do.

JuliaS's picture

Could someone tell me how many BitCoins a gallon of gas was worth in NY this weekend?

AgShaman's picture

Hahahaha.....now that was funny.

I'll let a bitcoiner zealot chime in with the proper metrics.......hahahaha

malikai's picture

Is this the "it is useless in a disaster" argument again?

Yawn.

laozi's picture

1 BTC is around $10. The rest I leave up to you.

 

I was a bit mad last time I wrote here, since too many ZHs doubted the usefulness of real science (ie not social science but physics and chemistry). You are now forgiven for your silly ploys.

 

I assume you only trust your mom (and still, that's pushing it). When you get a bar of gold in your hand, you do not have to trust the buyer, and this is a very good thing. But what if you want to buy something on the net? How do you send gold to somebody who do not wish to reveal a physical address? Bitcoin solves the problem of trust on the internet.

 

Bitcoin is not controlled by a central point. It is controlled, much like the internet itself, like a network of servers. Anybody can set up a server an participate in the bitcoin network. These persons are called "miners".

 

I understand that many of you know next to nothing about science, and I strongly suspect most of you do not know much about programming either, but fear not: many other people do, and they (we) will lead the way when it comes crypto currencies. We will use BTC among ourselves, while most other people will not. BTC will be a sideshow for many years to come, until the mainstream catches on.

JuliaS's picture

Physics and mathematics are my career fields. I do know programming. I also know enough about bitcoins to know that they are impractical.

You may think you know a lot, but you know nothing about money, why it exists and what function it performs.

Good luck to you and your people.

malikai's picture

You may have overlooked the machinery you used to deliver that message to the rest of us and how it has reshaped our world as of late. You may have also overlooked the utility provided by this impractical bitcoin in the context of our current world and monetary system.

Thank you. And good luck to you and your people.

StychoKiller's picture

I don't think you know how cryptography works.  Can the algorithms be changed?  Sure, but what happens to all the BTC generated thus far?  Talk about cutting off yer nose...

Money Squid's picture

You and the other Tylers have posted Bitcoin info many times during the last two years. If you are trying to determine if ZH is going the Bitcoin route by reading these stupid comments (mine included) then I just lost a little respect for the Durden's knowledge of all things financial. If ZH starts accepting Bitcoins that will be Durden-like, althought a bit late, but it changes nothing in regards to the fact that Bitcoins are no more secure than any online transaction.

If ZH goes with Bitcoin I will purchase a t-shirt and make another donation....not in bitcoin though.

GuyFawkes's picture

Money Squid, Bitcoin is substantially different than any other online transactions, especially in the security context. As the first cryptocurrency that solves the electronic cash double-spend problem by way of a distributed p2p architecture, it is different than PayPal because it does not rely on a State-issued monetary unit and it is different than e-Gold because it does not have a single centralized point of failure and/or confiscation.

malikai's picture

You can lead a horse to water...

blunderdog's picture

I'm one of the most skeptical people I know.  Skepticism is saying, "I don't believe X without very good reason."

Neophobia is saying, "I don't understand something new, therefore it's BAD."

There's no discernible relationship between those two perspectives.  One is about epistemology, the other is about value judgments.

The Ponz's picture

How do you do ecommerce with PMs (without some derivative involved)? Or other transactions over long distances?

Bitcoin could be useful to the liberty movement.

Shelby Moore III's picture

Trade knowledge instead of money. See my other comment for more reasons not to use money:

http://www.zerohedge.com/news/2012-11-04/bitcoin-seen-through-eyes-central-banker#comment-2947340

The supply of knowledge is not limited, unlike all forms of hard money which means they retard knowledge production because they reward idleness and limited supply must eventually be subverted by the fractional reserve demand created by inexorable demand for debt from the low knowledge producers. Because fiat money retards knowledge production by misallocating capital to the low knowledge producers. I explained this in more detail at the link above and the sub-link to my thesis paper (draft).

stacking12321's picture

silver shield is a stubborn fanatic, the fanatic-est of the fanatics.

when he gets an idea in his head, nothing will change his mind.

while i give him props for his work on the advocacy of silver, his attitude on bitcoin is just plain wrong.

he refuses to see that bitcoin is very useful as a payment GATEWAY, a decentralized form of payment that is not beholden to any government, not taxed, and no one can arbitrarily print more bitcoins.

you don't save wealth in bitcoins, you save your wealth in real assets like silver, gold, real estate; just buy bitcoins when you want to spend them.

his speculation that bicoin value will go to zero some day, is totally irrelevant - it's not zero today, and it's a useful form of transaction TODAY - why not use it?

 

Haole's picture

Thanks for these comments!  These are the kinds of fundamentals I seek in understanding this "currency" and it's uses.

Also, I share your thoughts on Chris Duane and his work enlightening people on silver but when I first heard him profess that people should sell everything they own and buy physical silver I thought it was extremely irresponsible on his part.

 

 

StychoKiller's picture

Eating too much Ag will turn yer skin blue; therefore, it's not a good substitute for food.

Shelby Moore III's picture

Scientifically false. Consuming too much ionic silver solution (Ag+) or silver hydroxide (AgOH) solution, will form silver chloride (AgCl) in the body which gets lodged in the skin. But consuming true colloidal silver (the deep yellow amber color) which contains Ag nano-particles (not Ag+ nor AgOH), will not make your skin blue:

http://www.cgcsforum.com/index.php/topic,1144.0.html

http://shop.silverlungs.com/SearchResults.asp?Cat=1820

I am not affiliated with Silver Lungs, just sharing that link so you can see the differences in color. The correct yellow stuff can be made at home:

http://www.cgcsforum.com/index.php/board,40.0.html

Do not use a nebulizer for this! We have mucus to prevent introducing (potentiously infectious) foreign matter into our lungs! Notwithstanding, one can't get the necessary 1/4 liter or more into the blood stream (want to spray that much up your nose)!

Shelby Moore III's picture

you don't save wealth in bitcoins, you save your wealth in real assets

The problem with bitcoin is the same problem as with gold (money is always socialism):

http://www.coolpage.com/commentary/economic/shelby/Demise%20of%20Finance,%20Rise%20of%20Knowledge.html#StoringIdleSavings

That is the supply can not grow as fast as people want to expand production, thus its value will increase just by idly holding it (for as long as the real interest rates are negative on any competing fiat). Thus people will hoard it (if there is ever any serious mass movement into it), thus destroying its viability for commerce (Dark Ages is an example).

The fundamental problem is that money can not represent a store of knowledge, and all value (and increase in production) created comes from knowledge. Read my article above if you want to understand deeply.

Money can't exist without credit (read the link above about the problem with gold), thus there can not exist a utopic advantage to any form of money that will avoid socialism:

http://www.cgcsforum.com/index.php/topic,1152.msg8867.html#msg8867

Money in every form is failure (socialism, suboptimal knowledge production) and thus not competitive (not even for the passive "investor" over the long-run):

http://www.cgcsforum.com/index.php/topic,1152.msg8882.html#msg8882

Read my other comment linked below to understand that only knowledge (not money) is unlimited (fiat is limited, as debt is limited due to misallocating away from knowledge production, and hard money is limited in supply causing hoarding due to increasing "value" rewarding being idle from knowledge production and because the marginal utility of saving money is not infinite, because again debt and interest rates are not...an circular illusion that society has rightfully destroyed throughout recorded history in boom and bust oscillations between the two manifestations of the same problem):

http://www.zerohedge.com/news/2012-11-04/bitcoin-seen-through-eyes-central-banker#comment-2947505

Evidence all the commentators here who expend their energy trying to maintain the value of their idle savings, instead of producing productive knowledge outside the scope of maintaining idle savings (that dog chases his tail forever into the poverty abyss... it is no different than the supranational passive capitalists who spend all their energy trying to sustain or increase their idle savings rather than producing knowledge).

Don't expect that you will ever understand what I just wrote. It is far beyond "one-in-a-million" level of mathematical insight.

BladeMcCool's picture

people still need to buy food and repair their homes. if bitcoin is the money du jour then thats what they'll use to accomplish their required economic activity. and frankly food, clothing and home repair is the only really necessary economic activity in my opinion (help me thknk of other really important stuff, would you?). savers should not be punished (and bitcoins are near infinteily divisible making ever smaller transactions within the realm of possibility)

Shelby Moore III's picture

Thanks for sharing your concern.

As I said, not even "one in a million" people have sufficient intellect, background knowledge, and reading comprehension to digest what I wrote. I don't mean to be condescending if I note factually that you entirely missed the point-- it flew right over your head.

You can start by noting that most everything you have today (including the internet and computer you using, and including the food, antibiotics, etc) all came from knowledge production. Manual labor and hard resources without knowledge would give you the quality of life that existed before the stone age and the discovery of fire. Then after noting that, then observe that if knowledge were static, then we can already produce all that we need with robotics, so we could just eliminate the humans and churn out zillions of material goods which no one would be able to pay for with money (because no one would earn an income). And then you could proceed to note that since knowledge is the only thing of value being added in the economy, then ... you can follow the rest of the conclusions in my thesis... (or do I need to repeat my linked paper "Demise of Finance, Rise of Knowledge" again in baby steps?)

But I still don't expect you to grok it.

P.S. the title could have been "Demise of Money, Rise of Knowledge".

P.S.S. Beside underestimating how much you depend on knowledge production to survive (and thus underestimate why you will be poor if idle yourself on money and savings), you also highly underestimated how inefficient it is to try to be self-sufficient and disconnect from nature's inexorable trend of maximum division-of-labor (more accurately division-of-knowledge) and maximum economies-of-scale.

BladeMcCool's picture

you're right I don't grok it. I'll have to set aside some time to read your papers to properly understand where you're coming from. I'll say this though about knowledge. It appears that once it is discovered it merely needs to be written down and shared to live on forever and spread like a virus to anyone who cares to read and learn about it. We have the tools now for unlimited knowledge sharing. Also new knowledge is discovered all the time in ways that are not motivated by money but by personal interest. Money is just a word for what your trading partner wants from you in exchange for the thing of his that you want. Anything can be money and I dont think the concept will ever go away as there needs to be some mechanism by which to allocate scarce resources. Again I'm probably totally missing your point so I'll try to read your papers and address things better in time. Thanks for responding and engaging.

Shelby Moore III's picture

Again you admirably demonstrate an interest and ability to seek knowledge, so I will in return share.

It appears that once it is discovered it merely needs to be written down and shared to live on forever and spread like a virus to anyone who cares to read and learn about it.

Can you grok nuclear physics even though it is written down? (also nuclear physics is always advancing and changing). Differentiate between data streams and usable information (which requires the knowledge producers to decipher):

http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=sixth+rule+of+ignorance

Noise becomes signal or vice-verse depending of the frame-of-reference, i.e. the mutual coherence of the transmitter and receiver, a.k.a. mutual resonance or Q (tuning), and I explained it with an example:

http://esr.ibiblio.org/?p=3744&cpage=1#comment-324949

http://esr.ibiblio.org/?p=3744&cpage=1#comment-324926

(it is quite satisfying to go back and read my comments linked above, as I have much more confidence and validation in the theory I was developing in my mind at that time)

I mentioned this in the "Financeability of Knowledge" section of in my paper:

http://www.coolpage.com/commentary/economic/shelby/Demise%20of%20Finance,%20Rise%20of%20Knowledge.html#FinanceabilityofKnowledge

"For example, if a corporation purchased a huge library of software modules or books, written by different authors, the managers could create nothing with this without the authors (or others) who are knowledgeable of these modules or books. If these authors were not already organically interacting, then they would not be able to at any price [...snipped...] Thus always the knowledge is owned by the knowledge producers. When a knowledge producer is gone, the knowledge previously produced is destroyed, if it was not adopted by another sufficiently knowledgeable producer.

The Inverse Commons explains that unlike sharing of hard resources, the sharing of knowledge increases the value of the shared knowledge. Current knowledge becomes more valuable as it gains more future potential uses, and only autonomous knowledge actors can maximize diverse use cases of interoperability."

You are getting closer to grokking my thesis:

We have the tools now for unlimited knowledge sharing. Also new knowledge is discovered all the time in ways that are not motivated by money but by personal interest.

Realize those who share knowledge do so for selfish but noble reason that their own knowledge can only be maximized by doing so.

For example, for computer software, I recently articulated the selfish economic decision about when to share or not share the programming source code:

http://goldwetrust.up-with.com/t112p240-computers#4753

In addition to the Inverse Commons link from further above, I also explained the math of why our individual knowledge can not be optimized without networking:

http://www.mpettis.com/2012/10/27/when-the-growth-model-changes-abandon-the-correlations/#comment-18789

I elaborated on that math, and made the analogy of using two-way radios to find the deepest valley in a 3D (3 variables only) mountaineous range:

http://goldwetrust.up-with.com/t182-technology-that-changes-everything#4754

So once you grasp that math, then you understand the environment is always changing (at least 7 billion times per second, given 7 billion autonomous actors in our global economy), as well as macro-scale changes such as accumulating economic imbalances (e.g. China's Yuan peg and its effects, etc). Thus the multivariate (100s or billions of variables) landscape is dynamic and thus we need dynamic knowledge to keep it annealed (optimized). If we let knowledge go static, the system and our species is not resilient and will decay.

So thus you understand that if knowledge becomes static, we are no longer necessary. We are no longer alive. We are no longer optimizing our environment. We go extinct. This is what in theory a 666 system would attempt to do, as I mentioned in my other comment below. Think of the "Ministry of Plenty" which allocates rationing and starvation in the book 1984:

http://en.wikipedia.org/wiki/Nineteen_Eighty-Four#Background

You see how sharing knowledge works? You stated some ideas, I responded, and in the process I understand my thesis better, while explaining it to you. Einstein said roughly if you can't explain it to layman, you don't fully understand it.

Money is just a word for what your trading partner wants from you in exchange for the thing of his that you want.

But money can't buy (guarantee) new knowledge production and knowledge is the only thing we produce of value. Money can't be sure that new knowledge will be produced. Without knowledge production, everything decays and ceases to exist. I further elaborated (from the "Financeability of Knowledge" section) in the "Knowledge Investing" section why money can't buy new knowledge:

http://www.coolpage.com/commentary/economic/shelby/Demise%20of%20Finance,%20Rise%20of%20Knowledge.html#KnowledgeInvesting

So therefor money is only a tool of socialism. It is a tool to misdirect resources away from knowledge producers towards those don't produce knowledge. In the mathematical aggregate (macro-economic scale over the long-run, i.e. over epochs), it serves no other purpose whatsoever. I covered this in more detail in my paper, and addressed for example the Buffett claim that money capital (finance) allocates resources most efficiently.

Anything can be money and I dont think the concept will ever go away as there needs to be some mechanism by which to allocate scarce resources

Yes anything can be money and it won't make any difference w.r.t. to the booms and busts over the long-run (because money in any form is always a tool of socialism due to the detailed reasoning I explained in prior comments), which is essentially (generative essense in my reductionist brain) because the only scarce resource are the knowledge producers and they can't be bought. I covered the scarcity of resources in the "Wheres the Beef?" section and also elsewhere linked as follows:

http://www.coolpage.com/commentary/economic/shelby/Demise%20of%20Finance,%20Rise%20of%20Knowledge.html#WherestheBeef?

http://www.mpettis.com/2012/10/27/when-the-growth-model-changes-abandon-the-correlations/#comment-18699

http://www.cgcsforum.com/index.php/topic,1152.msg8871.html#msg8871

http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=sixth+rule+of+ignorance

Thanks for responding and engaging.

Thank you for the dialogue. Hope I have clarified a bit, or at least peaked your curiosity.

Shelby Moore III's picture

The problem with bitcoin is the same problem as with gold (money is always socialism)

http://www.coolpage.com/commentary/economic/shelby/Demise%20of%20Finance,%20Rise%20of%20Knowledge.html#StoringIdleSavings

That is the supply can not grow as fast as people want to expand production, thus its value will increase just by idly holding it

Note I am not criticizing the secure, anonymous, distributed trading capability of BitCoin. That could be reused in a knowledge trading system, where the supply of knowledge is allowed to increase by the market. In theory such a system (possibly coming soon) could destroy or attenuate the incidence of money, socialism, and governments. If ubiquitous, those vested interests (in money, e.g. central banks, governments, socialized welfare recipients, savers, passive investors, speculators, etc) might resort to 666 physical tagging in order to regain the ability (top-down control) to tax, redistribute, and destroy knowledge production (as they do now).

P.S. For those that like spooky correlations, a 666 system trends to knowledge becomes static (since any rise in knowledge becomes a threat to such a system), and thus axiomatically humans are effectively lobotomized (which is consistent with being harvested for their blood and flesh only since their brain wouldn't matter). Note that 666 is roughly the wavelength of blood red. So there is a potential solution to the biblical puzzle of the "number of a man". It is his blood. Think of the "Ministry of Plenty" which allocates rationing and starvation in the book 1984:

http://en.wikipedia.org/wiki/Nineteen_Eighty-Four#Background

I guess due to being blinded in my right eye in 1999, I remember the rats eating the eyeballs when victim was placed in the face cage, as a way of destroying all will for free thought and knowledge production:

http://www.youtube.com/watch?v=O-3HaOvUIzw#t=125s

boogey_bank's picture

Hi Shelby M. III, my 2 cents,

I don't buy Your argument about idle hard money worst than industrious funny money. I believe in ratios. Here in South Europe, even after the real estate correction, in a small touristic spot (nothing special) You can find a small house priced something like 46 yr of J6P average income. What we need is what we fear: a complete bust in RE and other sectors. Banks will not survive? Fu** them all... This is another problem. This is Glass Steagall repeal (and it's european equivalent) chickens coming home to roost.

Shelby Moore III's picture

You built the strawman of the bad effects of fiat money, then concluded that the effects of hard money are somehow different (even superior) without thinking it through and substantiating it. This is the myopia I am trying to correct.

I did not say hard money is worse. I said (if on a global basis, and not a localized gold standard receiving influx of gold) it will lead right back to fiat money again (see "Storing Idle Savings" section my paper), because people will demand usury and you can never stop that. And hard money can not be sustainably loaned because its supply is limited and usury grows at an unlimited compound rate. Thus fractional reserves come naturally (even illegally as they did by the private banks in 1800s), because of the law of supply and demand (if people demand it, supply will come). Read this:

http://www.zerohedge.com/news/2012-11-04/bitcoin-seen-through-eyes-centr...

Also hard money rewards people who sit on money instead of produce knowledge (as many of you do now, exspending muchtime thinking about your stacks of gold and silver). Note I have stacks (of unspecified quantity) too but I stopped thinking about them, because the measily annual increase in value of 21% (before taxes! what if they raise them to 100% as FDR effectively did? And block money laundering into a new digital fiat), can't come close to what I can generate in returns with my mind creating new software.

Hard money is not a solution to anything long-term. It allows the passive capitalists to enslave the world, then the masses try to fight back by borrowing more, and the cycle repeats over and over.

The only solution is individual knowledge production. It is up to you, if you want to end up with nothing or not. At the End Game, all the gold "investors" are destroyed any way. It must be that way. Do you really think nature is going to reward you for stacking money?

http://www.marketoracle.co.uk/Article20327.html

There is no system that will protect you. Nature wants you to be constantly producing knowledge in order to survive. Nature does not want to get you a comfy soft bed. Nature wants to keep the threats dynamic, so that you don't become complacent. Read the Parable of the Talents in the bible (even if you are an atheist, there is some economic wisdom).

====================================================

 

Let me explain it to you in different way. When gold skyrockets in value, it means the debt system collapses, which means the value of what the passive capitalists owns has imploded. They end up owning all the failure. By buying gold, you will own a large share of what is left, but what is left is failure. You end up with all this overcapacity in everything, even factories.

This enables interest rates to go sky high again, because real capital is scarce, as everything has imploded.

This is the 666 or slavery directed system because it seeks increasing failure as long as control is maintained (see the Ministry of Plenty in 1984), that oscillates between fiat and hard money.

Fortunately it doesn't own knowledge producers, and thus the progress of technology continues more or less orthogonally (although the capital adoption it is not linear, e.g. China is subdizing -800% profit margin losses in order to slow down the onslaught of automation and robotics that will come after China collapses).

So by holding gold you end up owning a larger share of failure. Of course, politics of the majority will never let you be a slave owner, unless you want to kiss up the king slave owners. So it doesn't work out the freedom-directed way you are expecting it will for you. Technology will probably bail you out, assuming you don't go live in a bunker and shut yourself off from it.

Freedom comes from knowledge production only, not from money.

The supranational passive capitalists (a.k.a. the banksters, elite, TPTB, Bilderbergs, etc) are enslaved by their passive capital. They could not for a moment have the freedom to walk away from the grind of managing slavery. Try being a manager at a fast-food restaurant or labor intensive business and you will quickly see how slavery is mutual. They are slaves to you and you are slaves to them, because they must each grab slices of your time to get approvals for each thing that they are not free to decide themselves (e.g. overriding a duplicate order at the cash register, etc).

Co-dependencing is a jail because it can consume all your time and you don't get to do any thing productive with your mind! If your dependents are doing low-knowledge things, then you end up doing so too, in order to manage them.

Lets take Bill Gates as an example (or even Steve Jobs). Although Gates was reputed to be a good coder, my understanding of Gates and Job's ignificant role were to be micro-managers of process in their key technology (and for Jobs also marketing) departments, i.e. the Cathedral model. This is why they never got around to understanding (or at least not fully adopting in Jobs' case) the benefits of a chaotic Bazaar model.

http://en.wikipedia.org/wiki/The_Cathedral_and_the_Bazaar

http://www.catb.org/~esr/writings/cathedral-bazaar/

Thus these guys built magnificient cathedrals, based on maintaining a firm top-down control on process. They were enslaved to it. When they left their companies, the cathedrals began to decay. These cathedrals has less value when left alone to run on autonomously. Have you not heard of the tirades and personal lashings dished out to employees by these two mega-managers?

http://www.dailymail.co.uk/news/article-1384932/Behind-screens-look-Apple-shows-Steve-Jobs-corporate-dictator-accepts-excuses-failure.html

http://www.pcmag.com/article2/0,2817,2385078,00.asp

http://en.wikipedia.org/wiki/Bill_Gates#Management_stylehttp://en.wikipedia.org/wiki/Bill_Gates#Management_style

http://ubuntuforums.org/archive/index.php/t-435346.html

It doesn't mean this men were not smart, rather that they applied their intellect to building co-dependent cathedrals, which bogged them down. The Bazaar model is in its infancy, and we are only just starting to see the early effects of it, e.g. the internet and Android (Linux) are generated from the bazaar model predominantly.

boogey_bank's picture

Also hard money rewards people who sit on money instead of produce knowledge

 

Dear friend, I agree with You, but You should please note that funny money is capable to produce even worst nightmares. In the place where I live people can't use trains becouse the local railway company embarked 10 years ago in a program to build galleries (under volcanic soil) in order to eliminate rail crossings. They used European Union funds.. now they are busted and don't have funds even to buy trains spare parts...

In a fiat funny money system someone pays you to dig holes in the ground and fill them again and sends the bill to future generations. You can't understand how  in Europe this flawed logic has gone far.. Bureaucrates crucifixed becouse not able to spend EU funds.. Simple Question: If EU give me funds to dig a hole in the ground but I Do not need a hole in the ground, why digging a f...ing hole in the ground? 

Europe has morphed in a movie set. The movie is Brewster's Millions

http://www.imdb.com/title/tt0088850/

but this is not a commedy and this is not going to end well.

Finally, I think we are doomed by the thinking of dead crappy economists like Davide Ricardo (comparative advantage crap theorem), Keynes (digging holes crap theorem).

They all sucks, Von Mises rules

boogey_bank's picture

PS I agree with Your "knoledge is our only salvation" argument, but at this moment I'm sorrounded by people doing silly, unproductive things with their ipads and tech doodads, so if knowledge will not give us mass occupation I fear we will experiment mass estinction.

Shelby Moore III's picture

That fooling around will turn into a goldmine of knowledge activity soon. Facebook and Google won't stand as the center of attraction for too much longer. The basic problem is the cloudstorage economies-of-scale. Once we work out the distributed P2P model then we get the cloudstore scale for free, Facebook, Google and their passive capitalists are toast.

TOR and Mute file sharing are two technologies with different goals and speeds. Both are much slower than client-server, and this is because the multifurcating network is much more efficient than the fully connected mesh. I am not sure yet how to overcome this issue, but I think it will come from a paradigm shift in some measure of semantic locality, i.e. my friends are most likely to need data about their friends, i.e. all people are connected by 7 degrees-of-friendship.

Shelby Moore III's picture

Yeah I know how bad it is in this recent occurrence underway, as well as the historic examples.. I even read the EU crats enacted legislation that Portugese fisherman aren't allowed to fish with their boats, they pay them not to work, etc.

The way we take away the power from the socialism, is not by using the money of the kings of passive capital-- which is gold. (they give us the fiat, they know gold is their fulcrum)

We do it by trading in knowledge capital. I will be posting an answer to PieEconomics futher below, explaining in more detail what I envision that to be.

Try to get involved in knowledge production. Get your mind off those fools who stay mired in that morass of passive money.

==============

Tangentially, Bill Gates was probably a control freak because of this mother:

http://online.wsj.com/article/SB124061372413054653.html

I have found that bright men who have controlling mothers, tend to end up having control issues. Some of them protect this outward as Gates did, and others project inwardly (you can guess who that man is in my family).

Gates was smart enough to be a hacker and adopt the Bazaar model, but his apparently parents (mainly the mother) ran a cathedral system.

Amagnonx's picture

I had a read through your links, and your essay 'Demise of Finance, Rise of Knowledge' and while it was interesting, and had many valid observations, there are some core conclusions that I do not agree with.

 

Your initial statement in the above post is "money is socialism".  From my understanding of your essay, you arrive at this conclusion because of your assumptions, which are not necessarily so.

 

I'll break this down into logical statements so we can analyze the source of our difference in opinion - from your thesis I distilled the following logical block.

 

"Money is socialism" ** Inflationary scenario

 

Money cannot exist without credit

Credit is debt, on which interest is paid

Holding debt is non productive

Production (including creation of knowledge) is the source of all wealth

Gaining from non production infers transfers from production to debt holders

Holders of debt steal wealth from producers

This is socialism for the holders of debt

 

I think this logic block represents your thesis with regard to your first statement.  Your statement, under current conditions is perfectly accurate, and I have no argument against it.  My position is however that charging interest on debt is plunder (as is clearly revealed above).

 

In nations with Muslim rule, interest cannot be charged on debt, and I believe that if people generally understood the above logical block they would also see that such a system is ultimately flawed.   In a system where usury is illegal (as it should be then things change).  The problem therefore is not money, nor is it credit, it is usury.

 

From following your logical progression, I can then see you would have a further challenge - that under deflationary conditions which might exist without usury, as there is little incentive to extend credit, then we have the following.

 

"Money is socialism"  ** Deflationary scenario

 

No usury means no credit

Without credit the economy contracts

Hard money increases in value

Holding hard money is not productive

Gaining from non production infers transfers from production to capital

Holders of capital steal wealth from producers

This is socialism for the holders of hard money

 

In this logic block it is the first statement that I consider false.  Without interest on debt, there is less incentive for private lenders to extend credit, this does not mean that there will be no credit.  Many retailers will still extend credit on the basis of payment plans that do not include interest, under a system that prevents usury this will include capital goods.  Retailers want sales, and payment options increase the number of potential customers.

 

Secondly, under a system which identifies the reason why usury is illegal, that system would see immediately the utility of public institutions extending credit, and charging interest.  These institutions could be run at a profit at times to increase their capital base, or entirely non profit.  They could be capitalized through taxation, after a period of time they would no longer require taxation, but would be self sufficient.

 

In my conclusions then, my main disagreement with your conclusions is in the identification of money as the problem.  The problem lies rather with private usury.  If the common people became educated as to the mechanism of the transfer of their wealth, then such a system could be implemented.  The barrier to implementing such systems are the current holders of wealth who wish to continue to plunder through the use of private usury.

 

Some of the other conclusions of your post I also thought worthy of discussion, as I understand the mechanisms and interactions between knowledge and capital to be different to those expressed in your essay.

 

One of the principles of your thesis is that 'knowledge' is increasingly not included in labor, nor capital costs.  That an increasing portion of knowledge is not accessible to capitalists, and represents an increase of freedom of the individuals who generate knowledge.  While I agree with many of your observations, I find this particular conclusion to be unsupported.

 

When any business is formed, the plant and equipment will always contain technology - for any venture to be successful it must contain plant and equipment that are close to the mean standard of technology, and a process that is close to best practice.  Innovation, which is an expansion of knowledge capital may occur anywhere within that industry, and will then be available to that venture either for 'free' (best practice, which is often shared) or through capital upgrades (which include patent costs).  Regardless of where the knowledge comes from, and whether it arose for 'free' - in the end there is a cost associated with implementation, and this is paid by the capitalist.

 

In summary, there is a stock of knowledge that represents the baseline for a society, whenever a capital venture is undertaken the current stock of technology is included in the capital cost.  However, that fraction of the cost is not increasing as you theorize, it is simply included as the cost of labor - which is no more or less skilled than labor at any other time, as the skills is reflected by the time taken to become proficient - and they draw from the current stock of information (the baseline).

 

Your suggestion that any industry can be based on manual labor and a non technological base of capital is flawed, there basically no industries which would conform to that description.  Even the primary production processes include very significant expenditures on technology, and ongoing high salaries for knowledgeable people.

 

You also conclude that money cannot buy innovation, this is correct to some degree, but not as a general rule.  Innovation mainly comes from skilled labor who are in the production process, engineers and scientists working in a certain industry.  Often these guys invent stuff and make improvements and these are automatically owned by their employers.

 

Money as capital represents any economic good and any labor, that means that money can buy knowledge in the form of information and skilled labor.  Money doesn't necessarily buy innovation, but innovation is rarely present without capital.  Some innovation comes from R&D labs, however this is kind of like buying lottery tickets, its not guaranteed. 

 

In the area of information technology, software development and so on, the cost of capital is very low - anyone with a PC may make an innovation.  This may occur outside of any regular business, and opportunities are still available - however this rate of innovation will decrease over time as this relatively new technology is fully exploited. 

 

I think some of your main conclusions are incorrect due to a failure of definitions, and assumptions of causation.  While I agree that 'knowledge' is increasing, and some of this is arising in the area of computers and software, I think it is erroneous to draw the conclusion that this new field is not subject to finance and that it will somehow cause hard assets to be diminished in value.

 

If anything, hard assets continue to grow in value as they become more scarce - innovation and an increase of knowledge may increase efficiencies, but essentially all our basic needs are derived from energy, mining and agriculture - regardless of efficiencies and knowledge, these assets will retain their value.

Shelby Moore III's picture

I upvoted your comment, because you elucidated your argument and distilled much of my thesis very coherently. I am going to argue against your logic though.

(this is hastily written at 3pm and I haven't even eaten breakfast yet due to being overloaded with tasks on the computer, so please excuse the poor writing coherence and try to deduce this writer's intention)

You distilled the essence of my argument into two logical scenarios.

Inflation scenario:

 

Holders of debt steal wealth from producers

This is socialism for the holders of debt

 

Deflation scenario:

 

Holders of capital steal wealth from producers

This is socialism for the holders of hard money

 

Excellent! I was understood! It is refreshing to have a dialogue with someone who has such strong logical reductionist skills.

Why Banning Usury is 666

Your thesis is that usury can somehow be eliminated or controlled through centralized law or by widespread education. And thus you see the vested supranational passive capitalists (a.ka. banksters) as the impediment to this goal.

However, you missed the very important fact of nature, which is that hard money will then perpetually gain value in this utopia, thus no one needs to work after they have saved enough to meet their current living expenses for perhaps a decade. You see without an opportunity cost on money, the incentive to produce disappears.

The borrowers are those who decided they don't want to produce any way, and will accept centralized control and slavery in place of the freedom of producing before consuming. So the middle of the politics (bell curve) is already demonstrating that human nature.

Also I can scientifically prove this is natural, because if the bell curve was flat (everyone was equal in education, production motivation, etc), then knowledge would not exist:

http://goldwetrust.up-with.com/t124p30-theory-of-everthing#4752

Because knowledge is not ever what we know now, but what we continue to adapt to. This can be explained both in terms of the potential energy of degrees-of-freedom as I did in my paper, and also as I have explained in comments here about if new knowledge production ceases, then no one has any income value to buy anything.

Nature can't be a uniform system, because then it becomes static. It is dead, e.g. everyone is a saver, no one is a producer. Imagine if everything in the universe  was the same shade of color, there would be no shading, and you wouldn't see any shapes. The objects would not exist in your visual senses. Apply this uniformity to every possible sensory perception, then nothing exists. It is all static and dead.

Actually this was well known already in 1856, the Second Law of Thermodynamics states that the universe forever trends to maximum diversity (i.e. maximum independent possibilities, entropy, and degrees-of-freedom).

You simply can not outlaw usury, unless you want to outlaw free will. Then you will have the 666 system that I described in my other comments here. To eliminate usury, you must eliminate the free market of autonomous actors.

I have a very strong math, physics, and computer science mind, and I have thought about this for 6+ years.

Jason Hommel explained his perspective of why banning usury won't work:

http://www.silverstockreport.com/2008/fekete.html (skip the email exchange with PhD Antal Fekete and scroll down the page)

Knowledge Can't Be Owned by Money Nor Finance

for any venture to be successful it must contain plant and equipment that are close to the mean standard of technology, and a process that is close to best practice

Correct due to the nearly binary nature of the least cost marginal producer.

Innovation, which is an expansion of knowledge capital may occur anywhere within that industry, and will then be available to that venture either for 'free'

Wrong. The lowest cost producer is not the lowest cost marginal producer and it can have proprietary technology that is far advanced (and more profitable). In fact, we often see this, e.g. Apple is much more profitable than Samsung or HTC in smartphones. Remember that knowledge is not spread uniformly (nor should nor could ever be):

http://www.amosweb.com/cgi-bin/awb_nav.pl?s=wpd&c=dsp&k=sixth+rule+of+ig...

You are clearly falling into the socialist logic trap. I don't know why most people fall in into it. Only a very few people can resist the urge to have a uniform distribution in society, perhaps because they don't have the anarchist's (me and very few others') deep mathematical understanding as I explained early in this post.

Regardless of where the knowledge comes from, and whether it arose for 'free' - in the end there is a cost associated with implementation, and this is paid by the capitalist.

Ludicrously far from reality, but I don't blame you for not understanding the theory well (Eric Raymond only presented the Inverse Commons in 1998 so it is still not well understood what is radically changing the world as we speak). Please re-read my paper again (and click the links in it to gain deeper exposition) and realize that new knowledge production can never be guaranteed by any amount of money. Refer for example to the Mythical Man Month in software production.

Also realize that if new knowledge production stops, then there is nothing in the economy of value, because no one is generating any incremental improvements in production, thus the owners of the production can run their systems with robots and the economy implodes on itself.

Your suggestion that any industry can be based on manual labor and a non technological base of capital is flawed, there basically no industries which would conform to that description

You are confusing past knowledge with new knowledge. You are failing to incorporate the Second Law of Thermodynamics. Industry could run on with past knowledge technology (i.e. the "base" you refer to) and robots (i.e. the cheapest manual labor), and yet society would collapse. It is the inexorable creation of new knowledge that both anneals society to changing environment (resilency) and more importantly that creates value other than the static knowledge so that society doesn't collapse into a few capitalists and their robotic production capital (albeit with very high base technology available before new knowledge activity ceased). And your notion that capitalists fund knowledge creation is becoming more and more ludicrously far from reality.

Often these guys invent stuff and make improvements and these are automatically owned by their employers

No it is owned by the person who created it, because more and more so (inexorable trend of maximum division-of-knowledge) knowledge is becoming so specialized that if you lose the creator, you've lost the ability to generate new knowledge from the past knowledge. This is why key software programmers are getting $millions per year in stock options and compensation. If you lose them, in many cases you've lost the ability to maintain the code. Software is becoming nearly the entire economy. And software is dynamic and has to be maintained, otherwise it must be discarded.

Money doesn't necessarily buy innovation, but innovation is rarely present without capital.

The 3D printer has arrived. Hard capital costs are declining to 0. All the capital is in the mind going forward. This is an epochal shift and we are warning the world:

http://goldwetrust.up-with.com/t182-technology-that-changes-everything#4754

Some innovation comes from R&D labs, however this is kind of like buying lottery tickets, its not guaranteed.

Correct. Money can not buy new knowledge production. It can provide capital resources to incubate them, but this is becoming increasing unnecessary. Heck I had to bypass the medical system and create my own home laboratory with four 9V batteries to cure myself of a terminal condition:

http://www.cgcsforum.com/index.php/topic,1130.0.html

the cost of capital is very low - anyone with a PC may make an innovation.  This may occur outside of any regular business, and opportunities are still available - however this rate of innovation will decrease over time as this relatively new technology is fully exploited

False it will accelerate, not slow. You missed the elephant in the room, because you don't understand that software is alive. Software always has to be expanded with new features, to meet the increasing knowledge of the users. Knowledge trends to maximum forever, due to the Second Law of Thermodynamics. Again review the "Energy of Knowledge" section of my paper. And everything is becoming software. Every process can be encoded in software, from business logic, to finance, to accounting, to engineering, to even sex (yes actual sex with electrodes to your brain or a physical robot or even a live mate who is also hooked to electrodes coming from the program).

If anything, hard assets continue to grow in value as they become more scarce - innovation and an increase of knowledge may increase efficiencies, but essentially all our basic needs are derived from energy, mining and agriculture - regardless of efficiencies and knowledge, these assets will retain their value.

You transposed cause and effect. All increases in extraction and production come from increases in knowledge. Thus resources are unlimited, because new ongoing increases in knowledge potential is.

As I explained in the "Where's the Beef?" section of my paper, any temporary apparency of limits is due to suppression or misallocation away from knowledge production (and we have massive doses of those debt bubbles right now in the inflation scenario, coincident with massive doses of the deflation scenario as we reduce the cost of manual labor to near 0, as China tries to compete against the coming onslaught of automation by pegging its Yuan to keep its manual labor the cheapest in the world by running industry at negative -800% profit margins!)

I do understand there are gradations between the extremes I have argued, and it won't all happen overnight. But do keep in mind that epochal shifts are often so sudden that they topple empires (old regimes), cause wars, etc.. as the masses scramble to adapt and survive. Today I wrote down some math on such adjustments:

http://www.mpettis.com/2012/10/27/when-the-growth-model-changes-abandon-the-correlations/#comment-18913

Note in that math, I forgot to include the potential for the technological frontier to leap ahead suddenly.

==========================================

See also the comment I wrote immediately after this one as some of my thoughts carried over to it:

http://www.zerohedge.com/news/2012-11-04/bitcoin-seen-through-eyes-central-banker#comment-2951115

Amagnonx's picture

It should be obvious from my explanation that my understanding of the subject wasn't coincident with my reading of your essay - I have developed this understanding over a period of time.

 

Now I have a serious question after reading your following comment;

"However, you missed the very important fact of nature, which is that hard money will then perpetually gain value in this utopia, thus no one needs to work after they have saved enough to meet their current living expenses for perhaps a decade. You see without an opportunity cost on money, the incentive to produce disappears."

 

Did you brain just broked?

 

What you are saying is that we should abandon the principles that saw the rise of civilization - that people who aren't busy producing 'things' are obviously under utilized, and we should make work.  This philosophy is everything that is wrong with our current civilization, leading to such detestable practices as 'planned obsolescence'.  I make a counter postulate, that those who are no longer burdened with the daily necessities are free to add value following a pursuit of their choice - and that those who pursue objectives out of free choice will always create greater value than those who do it to merely subsist.

 

I should also add the following, which was omitted from my prior post - I also consider the rental of real estate, or information to be the same process of plunder as usury.  It is unproductive, and therefore steals value from production.  The implementation of such a system (of making plunder illegal) has a profound impact on society - there is simply no way to get wealth except by supplying productive capital (which can only come from labor), or by providing labor - or of course by theft.

 

"You simply can not outlaw usury, unless you want to outlaw free will."

 

This statement reveals an ethical issue - stealing should be illegal - it is an exercise of free will, but it infringes on others.  It is not just the person who is paying the interest that is losing value, it is everyone - and they did not consent.  As a reminder I presented the logical argument regarding interest payments, and that the value is stolen from all producers.

 

From your reply;

"You are clearly falling into the socialist logic trap. I don't know why most people fall in into it. Only a very few people can resist the urge to have a uniform distribution in society, perhaps because they don't have the anarchist's (me and very few others') deep mathematical understanding as I explained early in this post."

 

You are referring to my assertion that an enterprise has access to industry knowledge.  I make no claim that information is evenly distributed, rather that it is either useful at the source (maybe vanishing later), or it enters the base of knowledge accessible to an industry - available for a cost.  I am also an anarchist, and have no problem with a mathematical treatment of any subject.  You simply accuse me of inability to understand, but I can only respond to your arguments, not some theoretical model that you do not present.

 

Imperial Rome is a great example of uneven distribution of knowledge and the impact it can have.  Due to an understanding of political and military organization, military hardware and some information on engineering, Rome conquered the known world.

 

As for the rest of your response, I want to refocus on your thesis. You really need to restate it clearly, because I am getting a very nebulous sense of what you are talking about.

 

In your thesis, money cannot be exchanged for knowledge - you are yet to provide a compelling argument as to why this should be considered a valid assertion.  From my observations, I see that knowledge is a facet of human labor - that it requires time and effort to acquire this knowledge, and that it is traded as an economic good.

 

The question arises immediately -if everything is becoming software, then where will food come from?  A further question,  if knowledge cannot be traded for money, what then will those who produce knowledge trade it for, and if everyone only produces knowledge - who will they trade it with?

Shelby Moore III's picture

I make a counter postulate, that those who are no longer burdened with the daily necessities are free to add value following a pursuit of their choice - and that those who pursue objectives out of free choice will always create greater value than those who do it to merely subsist.

I was never arguing that the knowledge producers live at a subsistence level. You are conflating orthogonal issues. Knowledge producers don't need to save in gold, they are producing so much value, they have abundance in either the inflation or deflation scenarios.

As I said at the beginning of my prior comment, that I hadn't taken a meal the entire day, and I was rushed to write that (so that I could go drive 30 min to find a meal) and I was so very hungry while writing that, so perhaps I didn't express myself as clearly as I intended.

My point is that if society rewards the idling of capital, then society stagnates. The Dark Ages was an example of this, where gold was hoarded and capital was thus scarce. The point that I was making is that those who don't produce much knowledge then take a larger share of the capital of the world, by hoarding some gold, ditto as in the inflation scenario by hoarding bonds (lenders) and debt (the borrowers).

Again you fall into the equality trap. You want to think that by allowing more people to live lazily, this somehow encourages more knowledge production. But this is not true. It demotivates them to cross the chasm of knowledge production, because laziness is the antithesis of knowledge production. Where Eric Raymond wrote about the Gift Culture:

http://www.catb.org/esr/writings/cathedral-bazaar/homesteading/ar01s06.html

He was referring to the abundance that comes for competitive knowledge production, not one that derives from a laziness motivation of passive capital:

http://www.catb.org/esr/writings/cathedral-bazaar/homesteading/ar01s08.html

You see when the dumb/lazy people get abundance, what do they do? Do they compete to produce the best knowledge? No they compete by who can give the most outlandish wedding, who can waste the most money on houses, cars, etc..

detestable practices as 'planned obsolescence'

Competition solves that. I think that is socialistic-fear-mongering nonsense any way. My 1999 GMC Yukon with the 5.7L Vortex engine is stilling running strong with 200,000 miles on it. Heck it isn't even a diesel. Again letting people get richer for sitting on money, is the antithesis of encouraging competition.

I also consider the rental of real estate, or information to be the same process of plunder as usury. It is unproductive, and therefore steals value from production.

So you are a socialist and not a free market advocate! I could detect that by the logical errors you were making. How is renting something you produce and maintain unproductive! Competition sets the price. Rentals and espcially software require a lot of maintenance. In fact, I read in Eric's Magic Cauldron that software is 75% maintenance.

there is simply no way to get wealth except by supplying productive capital (which can only come from labor)

Correct on productive capital, incorrect that labor is productive capital. Knowledge production is productive capital, and labor is not knowledge production. Proof is the government can create a million jobs by giving a million men a million spoons, instead of using hydralic backhoes-- that is the antithesis of production.

I am also an anarchist

Sorry I can not agree with your self-assessment, when you decry free will, because you claim it inpinges on the society.

And I could explain this deeper, but I am not going to, because getting into a debate with a socialist is unproductive.

money cannot be exchanged for knowledge - you are yet to provide a compelling argument as to why this should be considered a valid assertion

If you haven't got it by now, I doubt there is anything I can say to convince you.

if everything is becoming software, then where will food come from?

Farms can be (already are) automated.

if knowledge cannot be traded for money, what then will those who produce knowledge trade it for

It is an asymmetric issue as I pointed out in my paper. The hard goods producers need existing knowledge and will trade for it, but new knowledge can not be forcefully created by any amount of money.

It is really key that when you study things, you pay attention to key details.

laozi's picture

Thank you for your post. I did not bother to read the post you responded to, I just assumed it was crap, written by som airhead.

 

Just wanted to disagree with you about one thing. You CAN use BTC as a store of wealth. I also suggest you do, if you know enough about the technology to understand it's fundamental properties, that is. It is a good complement to gold.

Shelby Moore III's picture

You are missing my point. I am saying that because the supply of BitCoin can not be increased, then if it ever becomes a popular storage of wealth, then its price will be in a bubble. Boom and bust again, just like we will see with gold.

I pointed out that hard limits to money supply are not sustainable for at least 2 reasons:

  1. They constrain debt, but society wants to produce more with debt than it can save. Society will always demand fractional reserve lending (and some banks will always provide it, even if they do it illegally as was the case in the 1800s in the USA).
  2. Hard resources rise in value (if saver does nothing) when they are the standard (i.e. are popular), i.e. there is perpetual deflation, like we had in the 1800s, but this can incentize savers to be idle knowledge producers thus causing the economy to decay (which was the result by the 1900s).