Re: Analysis of Bitcoin by Former IMF Economist / Current Central Banks Advisor

[Tanential to the web-payments topic, except in terms of considering how
medium-of-exchange volatility is to be handled...]

RE: "volatility being inherently terminal" + " when a store has a "50%
sale""

Melvin, If you say that, then do you stand with the governments of Finland
and China who have determined that BTC is a virtual commodity, not a type
of money?
http://www.bloomberg.com/news/2014-01-19/bitcoin-becomes-commodity-in-finland-after-failing-currency-test.html

Sure, the prices of goods and services are supposed to rise and fall with a
vendors strategies and tactics in relation to supply and demand. But the
"prices" of currencies are not supposed to do that, rather they are
precisely supposed to NOT do that. Because in a well-functioning and
efficient market for goods and services, autonomy over goods and services
prices vests with the vendors of those goods and services, not with the
programmers of forex algorithms and other speculative instruments who have
nothing to do with those vendors.

Sure, in today's forex market the whole point of the "Speculation Use Case"
is volatility. But the forex market as we've come to know it since the
early 1970s is not serving the economic purpose of facilitating the "Goods
and Services Commerce Use Case".

Joseph Potvin





On Sat, Jan 25, 2014 at 9:06 PM, Melvin Carvalho
<melvincarvalho@gmail.com>wrote:

>
>
>
> On 26 January 2014 01:17, Joseph Potvin <jpotvin@opman.ca> wrote:
>
>>
>> http://wcoats.wordpress.com/2014/01/25/cryptocurrencies-the-bitcoin-phenomena/
>>
>
> Quite an informative piece.  A few inaccuracies, such as he says that
> there's a 10 minute wait in the P2P network before a transaction is
> confirmed.  Actually most transactions are pretty instant.
>
> This is largely an opinion piece.  He seems to have a strong view on
> volatility being inherently terminal.  I think there's a difference between
> inflationary currencies and deflationary currencies on this point.  There's
> a long held view at central banks (in fact the ECB even made a cartoon
> about it) that deflation is bad.  The theory goes that if something is
> deflationary people will hold on to their money before spending it, so that
> prices come down.  However, prices continually drop in the computer
> hardware industry, and yet people still buy computer hardware.  Similarly,
> when a store has a "50% sale" to attract customers, it does not mean that
> this is the only time they interact with customers.  Inflationary
> currencies can achieve stability, but it comes at a price (ie the
> inflation).  Dr. Bernanke has described inflation as a tax.
>
> I think there's room for both systems.  As per the quote from the article.
>
> [[
> "My expectation is that it will never achieve importance and that it is
> likely to vanish all together, giving way to more robust means of payment
> of more stable mediums of exchange. However, it deserves the chance to
> compete"
> ]]
>
> Most transactions in bitcoin will happen off block by trusted third
> parties as part of an IOU system.  If these TTP's are firms they can (and
> do) comply with existing laws.  I think it's a reasonable balance because
> you choose if you want to use a trusted third party for the fee they
> charge, or you choose to go to the block chain, for the fees that miners
> charge.
>
>
>>
>> Background:
>> Former Assistant Director of the Monetary and Financial Systems
>> Department, IMF
>> http://www.compasscayman.com/cfr/company/Warren-Coats/
>>  http://works.bepress.com/warren_coats/
>>
>> Joseph Potvin
>>
>
>


-- 
Joseph Potvin
Operations Manager | Gestionnaire des opérations
The Opman Company | La compagnie Opman
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jpotvin@opman.ca
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