It's great that Krugman is trying to to make a purely positive analysis of the potential impacts of Bitcoin. He's entirely correct in saying Bitcoin has zero inherent value, as opposed to gold and USD. But that's missing the point.
Most of us don't think about owning gold in terms of how readily we can make pretty things out of it, or dollars in terms of how easily we can pay our taxes. We hold onto them because both have a reliable history of being easily traded for other goods and services. Ease of exchange trumps inherent value as soon as a currency's users regard it as stable, and Bitcoin hopes to be there in a few decades (presumably starting with the sort of people who follow interesting tech developments, rather than those who care about inherent value).
As a side note, the headline is ridiculous linkbait and someone really ought to change it. Krugman spends most of the article explicitly stating that he doesn't want to muddy the discussion of how well BTC will actually work with normative/political arguments (i.e. the word "evil"). I can't help but feel like someone other than the author titled this article.
> He's entirely correct in saying Bitcoin has zero inherent value, as opposed to gold and USD.
No, no, he is NOT correct on that. Bitcoin's inherent value is in the Bitcoin technology. Inherent value of USD is that government declared it has value (by fiat). You can actually create "pretty things" with bitcoin technology, the same way you can create pretty things with gold - those are just other things.
The United States is a superpower that many people enjoy calling home (you may even be among them), and it will probably be around for a good long while. If you chose to live there, you have a civic obligation to pay taxes, which are accepted in USD. If that's not inherent value, I'm really not sure what is.
Nobody believes the Bitcoin protocol itself is beautiful in the same sense as gold, although I do know a few computer scientists who might find it intriguing. I suppose you could make the case that the ability to make anonymous transfers has some inherent value - but even that depends on how well BTC is adopted as a medium of exchange.
> If you chose to live there, you have a civic obligation to pay taxes, which are accepted in USD.
1) Can you produce my signature on said document that certified this contract?
2) Let's assume I choose to expatriate because I no longer wish to pay taxes and support this country's views. Why, then, might I owe a large "exit tax" upon leaving when I've already paid capital gains tax, income tax, sales tax...
Every HN post on Bitcoin has to have a discussion about the definition of fiat money.
Fiat literally means "it shall be"; in terms of fiat money this refers to government's declaration that something is legal tender. The US declares that the dollar is to be used as money - that makes the USD fiat money.
Enough people use the term to refer to money which has no "intrinsic value" that the term now means both things. Personally I think that's nonsensical – if the US declared that gold coins are to replace the USD as legal tender, then those gold coins would be fiat money, regardless of any intrinsic value gold might have. But you can't argue against language evolution; "fiat money" has two different and unrelated definitions now, and we need to repeatedly have arguments ending in both sides being correct and nothing of value being concluded.
This discussion must now, as is tradition, be followed up by a discussion of what intrinsic value means and whether it exists. So go on, discuss.
Ok, but I think the point is clear. USD has value because U.S. government said so and people trust that government, and Bitcoin has value because some people trust the Bitcoin network as the "currency issuer".
If we imagine a scenario, where a majority of businesses will accept bitcoins, and people will be able to buy bitcoins and use either dollars or btc for payments, and both methods will be legal, we will see that dollar doesn't have any more "intrinsic value" (whatever that means) as bitcoin. It will be just two competing payment systems with different attributes.
Right, the trust in the future spending power makes a currency not only a medium of exchange, but a medium of store.
It seems that as far as alternative currencies are concerned, altcoins have a better chance of being spread. What's to prevent Amazon from coming up with AmazonCoin, pre-mining an entire AmazonCoin set for themselves, and then offer this altcoin with a liquidity guarantee on largest retail site. Nothing to prevent them from accepting BTC, but I think any US retailer would be prone to quickly trade in BTC for USD after the transaction is completed, as there's volatility risk, and payments to merchants and the tax man are due in USD anyways.
Krugman is smart and a bit condescending, with a sarcastic bent. "Is evil" was not prima facie humorous, but the way certain people in this thread have responded to the title without reading the article may have been part of the joke.
Well, I disagree. He spelled out why he thinks Bitcoin is evil, he thinks it was cooked up in a lab by cyber-Libertarians to destroy the power of the State to tax, an activity which he thinks is a good and necessary thing. His only consolation is that he thinks it won't work, but that doesn't change the black, black intentions of Satoshi Nakamoto and his Crypto-anarchist crew. I'm serious that he's serious: he thinks Bitcoin is evil, in much the same way that some politicians think Tor is evil because child pornographers can use it.
It's still a totally inaccurate bait and switch title, which annoys me and makes me like his column a little less.
If I click through to an article called "Bitcoin is Evil", maybe I actually want to read about how a Bitcoin-dominated world is going to making exploiting the poor trivially easy. I'm not convinced yet, but it's a plausible (if normative) argument someone could make, so there's no sense in making a joke out of it. Especially if - like Krugman - you already support redistributionist taxation and the welfare state.
Judging from a follow-up discussion, I believe you're using the word "redistribution" in a way that is meaningless and/or needlessly gives ground to a libertarian framing of the situation.
In a nutshell, if you say "redistribution", you must have some baseline in mind. Many people are fooled into accepting an "everyday libertarian" distribution of resources as a baseline, but this is both philosophically problematic and politically foolish if you are not a libertarian yourself.
Taxes are part of the distributive system of society, as are other parts of the legal code such as patents and copyright law. There is no reason to label one part of the law "redistributive" while you call other parts merely "distributive".
Interesting read from Bruenig! While it's true that the term "redistribution" (as opposed to "distribution") implies a default where everyone gets back exactly as much value as they paid into the system, it's also common parlance for progressive taxation and equal benefits. That was the sense in which I used the term.
I'm not a libertarian. I am using the correct terms that apply to those policies. I don't think of the phrase "welfare state" as pejorative, nor was it originally intended to be so. A combination of redistributionist tax code and generous healthcare/education/benefits are working out really well for Scandinavia right now, and in my opinion we could learn quite a bit from what we're seeing in those countries.
In my experience, strong libertarians prefer to avoid even mentioning that the poor exist.
I'm sorry if I offended you in some way. "Welfare state" is a widely accepted academic term, and I was using it in that context. I could just as easily have said "states with very progressive tax systems that offer substantial benefits to all citizens, rather than only those who pay." It would have gone over better with those of us who feel strongly about a US transfer payment system ("welfare"), but it didn't really roll off the tongue.
I wasn't offended, I was merely pointing out that saying you don't think of it that way isn't really what matters in these matters; what others think is.
But sure, talk about the policy, though I didn't disagree with anything you said policy related.
Most of us don't think about owning gold in terms of how readily we can make pretty things out of it, or dollars in terms of how easily we can pay our taxes. We hold onto them because both have a reliable history of being easily traded for other goods and services. Ease of exchange trumps inherent value as soon as a currency's users regard it as stable, and Bitcoin hopes to be there in a few decades (presumably starting with the sort of people who follow interesting tech developments, rather than those who care about inherent value).
As a side note, the headline is ridiculous linkbait and someone really ought to change it. Krugman spends most of the article explicitly stating that he doesn't want to muddy the discussion of how well BTC will actually work with normative/political arguments (i.e. the word "evil"). I can't help but feel like someone other than the author titled this article.