People say “Dash isn’t cryptocurrency – it’s a business!” But what do they really mean? It’s true – Dash is a decentralised autonomous organisation. People make money from Dash. But people made money from Bitcoin too. So what is the problem?
Tag: austrian economics
Alien economics – The ideas economy
In the evolution of money, first comes barter, then goods like silver, gold and conch shells, then comes fiat currency, then cryptocurrency such as Bitcoin. What comes next? At each step of the way, people trade something which represents an idea – the idea of labour, or the idea of value provided. What if we could trade ideas themselves?
Episode 82 – Tuur Demeester: Adamant Research
The Episode:
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The Story:
Tuur Demeester of Adamant Research states that Bitcoin is “as if gold was invented 7 years ago”. Bitcoin was indeed designed to have all of the qualities that make sound money, and has provided what was thought to be impossible – a scarce digital commodity – a crypto-anarchist’s wet dream.
Since Bitcoin’s initial rise in popularity, many people have began to question what the word “money” even means, forcing many economists to question their theorems and assumptions. And, when comparing cryptocurrency to fiat currencies around the world, an inquiring mind may eventually come to the conclusion that there is nothing more dangerous or destructive than to have money under the control of central banks – enabling endless wars and imprisonment of many peaceful people.
Since 2007, many central banks have been colluding with governments to increase currency supplies, creating an excess of “cheap money” – that is, currency from loans with artificially low interest rates. The low interest rates encourage entrepreneurs to borrow more and more – which, in the short term, appears to stimulate the economy – however, this then becomes an unstable economy, because the business owners have been fooled about the true amount of resources available. This leads to many bubbles – and the subsequent bursting of these bubbles.
Take the Australian economy as an example. Over the past ten years, or longer, Australia has been riding the wave of the commodity boom, caused by artificially cheap credit and loose investment, accompanied by strong buying power from a booming Chinese economy. Now, however, many prices in the commodities market have been falling for the past twelve months, and nobody knows where they will find a bottom, and the Chinese stockmarket is suddenly struggling with its own crisis. As a consequence, many mutual funds and other investment firms are left out to dry, holding derivatives from companies such as Glencore, which have overextended themselves using cheap loans. Furthermore, many regular Australians might be left holding houses and other property, fueled by the collective delusion that is financially sound to undertake a 30 year contract to pay off a loan and get that family dream home.
The icing on the cake is that there is a surge of baby boomers that are looking to retire this decade. They are feeling very comfortable with their investment portfolio and with massive equity held in the family home. “Now is the time to enjoy myself after a lifetime of work”, say Mr. and Mrs. 65. Unfortunately, if international markets continue to tumble under the pressure of falling commodity prices and the collective population awake to the reality of the insolvent banking system – retirement could quickly become a luxury of past years.
It’s here that the immeasurable value of the new virtual asset, Bitcoin, will play a major role in access to and storage of your own money. Perhaps a safe haven to park you money, or at least a little bit for the soon coming rainy day. In this episode we speak with Tuur Demeester, where we talk about Bitcoin, the future of the world economy, the Australian economy, and his investment newsletter. Join us on a rollercoast ride from boom to bust, in the next thrilling chapter of … The Paradise Paradox!
The Eps:
Currency Collapse Normalcy Bias
Episode 70 – Glencore Risk: Credit Crunch Crisis Crash
The Links:
How to Position for the Rally in Bitcoin by Adamant Research
Australia bet the house on never-ending Chinese growth. It might not end well
Currency Collapse Normalcy Bias
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If you’re not looking for alternatives to government, modern democracy and economies dominated by centralised control of currency, then you’re just not aware how bad things are. To go about your daily life, you might not have to confront these issues. Though you complain to the cashier about prices rising and blame the person or company that’s right in front of you, though you never stop to think about the deeper causes. You complain to your insurance agent that his prices have risen 10%, while the CPI is at 2.6%, but you never question why such a thing as a CPI exists in the first place.
It’s something like living in what you think is a happy marriage – a “satisfied” marriage . You’re more or less nice to your partner and your partner is more or less nice to you. You live together; you’re both financially comfortable; perhaps you even share intimacy from time to time. Yet, one day you wake up and can’t ignore the signs that your partner is cheating on you, or has no passion, or is completely indifferent to your presence. You drive to work and yell at the guy who cuts you off, and that sudden outburst gives you the chance to bury your overwhelming suspicions. You distract yourself with your work, forget about your paranoid, careful, and accurate analysis, and push yourself in denial for another few months. That is something like how a first-world central bank-dominated economy is. You can ignore it, and deny it, until one ominous day, in which you cannot.
Many people in the world don’t have that privilege – the privilege of ignorance of how badly they are being fucked. They have that personal knowledge because they have lived through several economic crises, currency collapses and devaluations. They’ve had to walk in the rain to trade Deutschmarks for pounds with shady characters in a dark alley. They’ve had to walk into a supermarket with the dread that a ruble is no longer worth five “standard units”, and they may not have the money to cover their groceries.
Normalcy bias affects everyone who has some semblance of normalcy in their life, and the more normalcy they have, and the longer it is sustained, the greater the bias.
The question is, what is going to happen in those countries where people have never really gone through an economic collapse or a currency crash, when it finally happens? What happens if the US dollar collapses, reducing central banks’ reserves to worthlessness? How far do the dominoes fall? Are people going to panic? Will there be a state of anomie, with people looting and killing for food and water? Will people be reduced to shock when they realise things that were once commonplace are, at least for today, impossible? What happens if there’s nothing in the supermarket? What happens if there is something in the supermarket, but the hundreds of dollars in your bank account are not worth anything by the time you get there?
Pizzanomics: The Minimum Wage
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A lot of people assume that without a minimum wage law, businesses will give their employees pennies, because they’re looking to increase their profits. I’m going to present a case using a slightly different scenario, involving a character we all know and love: pizza. This is Pizzanomics.
Are there price controls on pizza in your town? A maximum pizza price mandate? No? The last time you bought a pizza, did it cost one million dollars? Two million, three million? Even if you didn’t pay a million, you must have seen an ad for a pizzeria charging that much – right? The business owner has a profit motive. Why doesn’t he charge a cool milly for a pizza?
Instead of paying a milly, you probably paid a price that was more or less consistent with the quality and convenience of the pizza. You probably paid a little more if you got it after 10pm, and you probably paid a little more if it was a gourmet pizza.
Let’s say you find a pizza place, and it’s the only one open. They have a pizza for $30 delivered. If you really want a pizza, maybe you buy it. What if the price is $50? You know an Indian place where you can get two curries and coconut rice delivered for $25, so you call them up instead. Maybe the price of the pizza is so high that everyone ordering in decides they will opt for Indian or Thai instead. In the coming weeks or months, will the pizzeria change their prices? What will happen to them if they don’t change their prices?
The next weekend it’s 2 a.m. and you’re feeling in the mood for a pineapple eggplant supreme. You call up the pizzeria and they say their price is still $50. Then you check your mail and realise there is a place that will deliver a supreme for $20. Assuming the quality of the pizza is similar, how do you think the first pizzeria will react when they find out their prices are being undercut? Maybe they will match the price if you mention it. Maybe they will beat it. Maybe they will bring their advertised price down to $25, considering they still have an established name. One thing they will most likely not do, is keep their prices the same and refuse to negotiate.
Why is this important? Are there price controls on labour where you live? A mandatory minimum wage statute, or a union agreement which is backed up by the force of law? The last time you started a job, or in your current employment, did you or do you get paid minimum wage? Most likely you get paid more than minimum wage. Only 2.5% of workers in the USA earn the minimum wage or less. Why do businesses pay more, even though they’re not forced to? The same reason a pizzeria won’t charge a million dollars for a pizza.
Instead of being paid a dollar a day, or being paid the minimum wage, you’re probably paid something that’s consistent with your skill level and convenience of your job. If you do something that requires little training, you probably get paid minimum wage. If you have more experience at it, you probably get paid more than minimum wage. If you do something that requires a lot of training or many years of practice, or if you do shift work, if your work is dangerous or you work away from home, you probably get paid significantly more.
There are less people who are willing to work a dangerous job, willing to do shift work, less people who have certain specialised skills. The decreased supply means the price must increase to match it. All of the employers are competing for the labour, just as the pizzeria is competing for your custom.
And that is Pizzanomics.
Episode 49 – Charlie Carlos
The Episode:
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The Story:
A man steps off an aeroplane in a foreign country, with little more than a few bags, a few changes of clothes. This man is no stranger to foreign countries, having travelled through his own country as a child, with his belongings stuffed in the back of a Mazda MQ, and just recently has skipped from the beaches of Sri Lanka to the ghettoes of Los Angeles. An experienced traveller with all of his bridges burnt, within days he is forming sentences in the land he has just discovered. The land is Mexico, and that man’s name is “Charlie”, but in Mexico he goes by “Carlos”. This fellow is a rugged mix of academic theory studied in a university, and raw experience of life.
Now, upon arrival in Mexico, he realises that he has no safety net, as his government has decided to stop giving him money to study. Can he survive in a foreign country with nothing but a Tarzan-like grasp of the local language, his Tarzan-like stature, and his wits?
In this episode, Carlos tells us about his adventures in Australia, Sri Lanka, the USA, and his philosophical adventures, criticisms of the higher education system in Australia, and his ideas about ideas.
The Links:
Panel about Silk Road trial at Anarchapulco
The Fallacy of Misplaced Concreteness on Wikipedia
Akon is bringing electricity to 600 million in Africa
A Tribe Called Quest – I Left My Wallet in El Segundo
Ghanaian entrepreneur: Growth hindered by foreign aid
Episode 15 – Economic Collapse
In this episode, we pool our economic thoughtpower together and attempt to make an estimate of what will happen in the world economy in the coming years. We reflect on some of the causes of the severe currency adjustment over 2014. We look at the actions of certain central banks – some increasing their money supplies, some staying stable for the moment, and some trying to increase their holdings of physical gold significantly. Is an another economic collapse around the corner?
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Related links:
Ron Paul vs Ben Bernanke – “Is gold money?”
The Myth that Laissez Faire Is Responsible for Our Present Crisis
Best Bits – Do you support violent governments?
An extract from episode 3 where Kurt asks Aaron some tough questions about what taxation is and how a government operates. Are governments inherently violent?
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Episode 3 – The Economics of Freedom
We discuss Austrian economics, and how it’s different in many ways to the schools of thought that are normally taught in universities, such as Keynesian economics and Modern Monetary Theory. We discuss the legitimacy of government institutions such as an offensive military, the police, and how some more effective solutions could be provided without taxation.
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Episode 1 – Welcome to Paradise
In this episode we introduce the podcast and talk about a range of topics such as ancient Egypt, channeling aliens from Andromeda, the US people’s perceptions of Mexico, the world economy, and propaganda.
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