Share on Facebook Share on Twitter Share on Reddit + - William White: Central banks making it up By Houses and Holes in Australian interest ratesat 8:14 am on March 4, 2014 | 80 comments Find a terrific interview with William White (former top economist of the Bank of International Settlements), on how central banks really have no idea what they are doing. Share on Facebook Share on Twitter Share on Reddit + - YOU MAY ALSO BE INTERESTED INJess Irvine predicts epic house price crashVia the AFR: The Reserve Bank of Australia isVimal Gor on the perversity of Fed tighteningFrom Vimal Gor at MT: September began as a monthBullhawk despair as RBA mulls further rate cutsVia WSJ comes Ian Harper, the RBA's chosen andJoye rides a bond bullFrom Chris Joye today: One of the most vocal Comments migtronixMEMBER March 4, 2014 at 8:30 am We were all thinking it, apparently so were they! lloydieMEMBER March 4, 2014 at 12:00 pm This central banker was capable of independent thought! Btw, mig – did you get on the AUR train? migtronixMEMBER March 4, 2014 at 12:03 pm AUR? Don’t think so unless that means gold lloydieMEMBER March 4, 2014 at 1:19 pm AUR – auroracoin. Just overtook ltc in marketcap in last 24 hours. Went from $5 per coin to $72 within 48 hours. migtronixMEMBER March 4, 2014 at 1:49 pm dang! No I did not! Thanks for the tip 🙂 btw you using btcmarket.com lloydieMEMBER March 4, 2014 at 1:53 pm Presume you are referring to Btcmarket.net? I haven’t yet. Take a look into Darkcoin – they are releasing automatic decentralised tumblers today. migtronixMEMBER March 4, 2014 at 2:10 pm know darkcoin well 🙂 Opinion8red March 4, 2014 at 2:23 pm Oh dear. Yet another in the now seemingly endless parade of “__Coin” systems predestined to further dis-credit alternate currencies in the public mind, due to an inherent Ponzi-incentivising basic design. When will you IT geeks learn that perception is everything in currency? Why do you think “confidence” is the obsession of the official legal tender currency vested interests? If you put an alternative out that even infers, much less highlights (to the average punter), the idea that there is any kind of cap or ultimate limit on the number of “coins”, the system WILL inevitably become a speculative Ponzi. The fact that you might enable fractional transactions can never alter the underlying perception, that “Hey, the more of these I can get / “mine” today, the more they will be worth in future”. In essence, all of these moronic designs recreate the exact psychology that usury offered on “legal” electronic digits does — (ie), that any of these bytes / widgets / “___Coins” I have now, will give me a “gain” in the future. *shakes head* migtronixMEMBER March 4, 2014 at 2:57 pm @op8 http://blockchain.info/charts Funny, looks like an awful lot of transaction is going on rather than hoarding. Silk Road currently boast 15,000 listed sellers, that’s a lot of sellers for a currency everyone is hoarding… lloydieMEMBER March 4, 2014 at 3:07 pm As I see it, the USD Ponzi is dying due to excessive credit. The digital currency Ponzi is just starting. Don’t get left too far behind. 😉 In a tech world, digital currency will dominate. And the entire world is moving in that direction. The Internet 20 years ago was nothing. In the next 20 years, digital currency will be a major force because it is programmable money. If you don’t understand what that means, use google. People will transact large sums without even thinking about it because they can. They will be able to tell money to be paid on trigger events. Money is finally joining the 21st century. Opinion8red March 4, 2014 at 3:17 pm Mig, that’s a straw man mate. I’ve never said or implied that noone will use these systems to transact, or, that everyone would simply hoard. What I am pointing to is the perception that is embedded in these designs, and what sort of behaviours that inevitably result. You’ve tacitly admitted on a few occasions that you are indeed attracted to BTC etc for the potential speculative “gains”, as well as for the practical (anon.) use. Now, I can’t say which of these is the primary driver / incentive for you — though I’d be fairly confident, based on your comments, to guess that it is the former 😉 Just because plenty of transactions are happening in BTC, does not alter the reality arising from its fundamental design characteristics. If you want to design an alternate currency that does not embody an incentive to speculative psychology thus behaviour, then as a basic design principle it needs to embody (bespeak) a clear understanding to even the dumbest adult that: 1. Stock is infinite; 2. Flow (viz. Time) is controlled, within certain clear parameters; 3. Each individual unit will effectively depreciate / decay / disappear (ie, demurrage) at a known rate. In other words, what you hold now, will get you LESS in future. If your currency system does not embody these 3 base principles, it will turn into an effective ponzi. Just like our official system. FreiCoin takes a stab at achieving the 3rd point, but is IMO still fundamentally flawed because it does not embody point 1 … just like BTC and all the rest I’ve seen to date. http://freico.in/how/ lloydieMEMBER March 4, 2014 at 3:23 pm Speculation is human nature and it doesn’t prevent commerce. Capitalism itself is built on the concept of profit accumulation. Freicoin – completely pointless exercise which is why it languishes at number 28 at a market cap of $1.4M. Enough of the theoretical BS, time to see digital currencies change the world. Opinion8red March 4, 2014 at 3:29 pm “Silk Road currently boast 15,000 listed sellers, that’s a lot of sellers for a currency everyone is hoarding…” How many BTC have been mined to date? What is the daily transaction volume, for goods and services? Just curious. I don’t wish to get distracted from my central point, which is that all these designs are crap (technology = great! design = complete sh!t), and so will result in dis-crediting the idea of alternatives to the legal tender status quo, in the mind of the average joe. And as we see, the powers that shouldn’t be very eagerly highlight the problems caused by ponzi fever in any of these apparent threats to their power. Opinion8red March 4, 2014 at 3:31 pm lloydie, “Freicoin – completely pointless exercise which is why it languishes at number 28 at a market cap of $1.4M.” … because it does not so clearly embody Ponzi psychology. Greed-driven speculators aren’t so keen on “mining” something that will decay on them. EDIT: “Capitalism itself is built on the concept of profit accumulation.” … exactly. Capitalism is based on usury … and look where that has got the human race. lloydieMEMBER March 4, 2014 at 3:33 pm @Opinion8red Well why don’t you just design us all the perfect coin, so that no one will use it. Just like Freicoin. No offence mate. Satoshi was a genius of people also. He understood human nature. Opinion8red March 4, 2014 at 3:43 pm Oh dear. Lloydie, it is clear to me that you are a fanboi, worshipping at the altar to the mythical Satoshi-san. So perhaps best we let this discussion end. FWIW, yes, I agree that digital currency is the future. No, I do not agree that any of these ponzi-inducing designs will last for very long in that future. Cheers mate. migtronixMEMBER March 4, 2014 at 3:57 pm @op8 you say its a ponzi, in which currency is it a ponzi? In BTC? Just because USD/AUD/GBP are ponzis by design (interest bearing generation) doesn’t make BTC as ponzi, its just soaking up all the other ponzis. You can’t make BTC into a ponzi (adding more at the bottom) but you can make FreeCoin into a ponzi! lloydieMEMBER March 4, 2014 at 4:07 pm @ Opinion8red I am a huge fan of Satoshi – designer of bitcoin. When you design a coin with a market cap of USD $8 Billion, then I’ll be your fan too. Don’t think it will happen anytime soon though. 😉 migtronixMEMBER March 4, 2014 at 4:54 pm @lloydie I wouldn’t count Op8 out of that just yet so maybe be lighter with your irony. @op8: I’ll have to explain myself because you should be able to get. I never started using BTC for hoarding, who would @ USD5? It was always a means to facilitate trade, just as it still is. i.e. I’m going to Future Music in Melbourne this Sunday, I joined btcmarkets.com, transfered money in bought btc, waited a day and btc went up AUD130 by pure luck so now I’m putting in the orders that I was going to and have extra left over. That extra I always add to the pile, which is not bad at the moment. The day I’m having difficulty buying or I think the price is crashing too quickly I’ll use my reserves to do my purchasing. How is that hoarding? I’m only “hoarding” because the price kept going up faster than I could spend it! Secondly the real brilliance of BTC is the block chain, its the exact opposite of using it for anon, the holder is anon but every transaction made with it – wallet/remainder/etc – is right there for all to see so “goldsmiths” can’t pretend they have more than they actually have on hand, because anyone can instantly verify it. You seem determined to look past this because – as far as you’re concerned – it has to be mined so its a bad design — but you still haven’t convinced me how? Opinion8red March 4, 2014 at 5:27 pm “the real brilliance of BTC is the block chain” On that we agree. It is the subsequent implementation of that development that is flawed 😉 EDIT: Forcing users to “mine” the blockchain in order to bring currency into existence, is a major fail. Think about that carefully, in context of all that I explained above. lloydieMEMBER March 4, 2014 at 6:44 pm @ Opinion8red Not according to the markets. Freicoin = rank 28. Bitcoin = rank 1. Or don’t you believe in free markets? Opinion8red March 4, 2014 at 7:50 pm lloydie, Dude, really? Every bubble or Ponzi in history looked good .. until it didn’t. That your beloved BTC ranks #1 in “market cap”, and FreiCoin ranks #28 (which you will note I also sh!tcanned as a flawed design), actually supports the points I have made. BTC has become a phenomenon for the fundamental reasons I have outlined, and not because it is a good design that will stand the test of time. The very fact that the BTC community uses the term “market cap” is a giveaway to its embedded Ponzi nature, thus perception. Is it truly being viewed by proponents as a real currency? Or, is it being viewed as an “asset” class, like equities? Quite obviously, it is the latter. If it were being viewed seriously as a currency, and not something to bet on, then why don’t proponents drop the “market cap” crap, and instead publish a list of FX rate values? Seriously mate, turn on your own brain, research, and above all, think. Don’t just come along mindlessly dribbling the same substance that gets spattered around in BTC circle jerking sessions, unless you have some comprehension of the wider subject area. There are no “free markets”. To even use that statement in any other context than one of derision or sarcasm evidences a lack of comprehension. With respect, it is abundantly clear to me that all you have to offer here are BTC fanboi talking points. You have demonstrated zero understanding of the many intermeshing dynamics of this topic area. You are way out of your depth. Happy to discuss with you, but not gonna waste my time if the mindless uncomprehending rubbish above is all you have to offer. lloydieMEMBER March 4, 2014 at 7:57 pm @ Opinion8red Whatever man. You go do your own thing. The rest of the world is a ponzi but BTC less so as fractional reserve banking is harder in BTC. Maybe you’re just too smart but judging from the personal attacks on me, I don’t think so. Your opinion is just airey fairey crap that economists like to spout. Over and out. migtronixMEMBER March 4, 2014 at 8:41 pm @Op8: You’re falling to the same prejudices, notice I never said anything about market cap and you did ignore all the things I said about its utility, which I was using as I typed on another tab – so… There are 2 kinds of BTC advocate, the nerd like myself who want to use it on the darkweb and basically eschew society and their hypocrisies as much as possible, and there the guys who can harness large computing power and so can arb some free money as long as BTC has a large market cap. The 2 are different, although of course I’ll avail myself of the opportunity to book a profit while its there to be made, don’t why you don’t? EDIT: and dude all I ever do is post the FX rates? Did it twice today Opinion8red March 4, 2014 at 9:18 pm Mig, I never accused BTC of not having utility. And, I never accused you personally of banging on about market cap. It’s important to be accurate here. I know that you personally reference at what x-rate you are converting BTC all the time; I presume vs AUD. But you are missing my point there. And, it was only a minor observation, in any case. At risk of getting totally sidetracked — do BTC proponents present an active list of FX values for BTC in anything other than USD? Do BTC proponents in any particular country bang on about FX values in anything other than their local national currency, or USD? Not that I’ve observed. My (peripheral) point there, was simply the observation that the fact BTC advocates tend to emphasise “market cap”, and/or its present “value” in local fiat terms, all points to the underlying truth of how its design is perceived by enthusiasts. I know you, mig, are far brighter than the average bear, and see the wider context. You clearly have considerable knowledge of monetary dynamics, usury etc. Most folks, and clearly most BTC enthusiasts, are not you. I remain convinced that the fundamental design features of BTC have the effect of attracting both “miners” and purchasers in very large part for reasons that are NOT positive for the long term viability of a currency system. Currency should primarily function as a medium of exchange (and unit of account). As soon as you build into a currency design any features — whether explicit or implicit — that encourage people to think that obtaining and/or holding that currency unit may give them a “return” above and beyond the cost of obtaining that unit in the first place (ie, a store of value), then you have white-anted the primary function of currency. Because now, people want it not just for the purpose of exchange ONLY, but also, in hopes of receiving a speculative gain. It seems to me that the deeper reason why the various “__Coins” have the design features they have, is because of an obsession with “gold is money” ideology by those who created it, and first adopted it. Hence, the idea of “mining” them; increasing difficulty in “extraction”; even the very name “___Coin”. It all fits neatly with a flawed ideological paradigm, of “money” as “gold” extracted from the ground in limited, but divisible quantities. drsmithyMEMBER March 4, 2014 at 9:20 pm If you put an alternative out that even infers, much less highlights (to the average punter), the idea that there is any kind of cap or ultimate limit on the number of “coins”, the system WILL inevitably become a speculative Ponzi. The fact that you might enable fractional transactions can never alter the underlying perception, that “Hey, the more of these I can get / “mine” today, the more they will be worth in future”. I suggest using an analogy with restricted land supplies and property bubbles. Particularly on this site, it should get the point across. Opinion8red March 4, 2014 at 9:23 pm drsmithy, Touché! Thanks, that gave me a hearty chuckle 🙂 migtronixMEMBER March 4, 2014 at 9:36 pm @Op8 Ok I’m glad you mentioned the gold money thing which is very strong as you say, but those of us who would advocate for its fitness point to the fact that its “gold” (re: scarcity) that is easily transported and impossible to fraction lend against because its all trace PLUS it solves the biggest problem gold had which was limited divisibility — no one is going to charge 0.001g of gold and shave a coin but BTC is no problem on that front at all. So it solve the storage, the transport and the divisibility issues of gold. The problem with the gold standard isn’t gold it self the hording, and clipping/debasement it encourages, is due to the divisibility problem because it literally goes out of circulation. BTC is always in circulation because its divisible to power of -8, so you can hoard it but as soon as you start spending it prices and stock of currency instantly rebalance. So again I too would implore you to consider those dynamics further as they are actually countervailing forces to the hording mentality. EDIT: speaking hording the FBI is sitting on circa a million coins it can give back to its rightful owner any time they feel like and suppress the price to boot! I’d like my 6 coins back FBI! @Op8 I promise you I will @lloydie I agree with you man they’ll pick coin one every time! Its why the coins in our pocket are the “colour” of gold and silver, I understand not wanting to use them for trade for the afore mentioned reasons but deliberately choosing a devaluing unit of account? That’s bizarre. Incidentally Op’s idea is a currency that extinguishes itself so does not necessary inflate way but is absolutely useless – on purpose – for storing saving in. lloydieMEMBER March 4, 2014 at 9:38 pm Here are two coins: 1. Coin 1 holds its value and appreciates over time 2. Coin 2 depreciates due to built in inflation Which coin are you going to choose? This is not a difficult concept to understand. Ponzi or not, 99.99% of human beings will pick coin 1. Opinion8red March 4, 2014 at 9:39 pm No worries mig. It’s all good mate. Tell you what, I’ll pledge to contemplate those points further, if you’ll do the same re mine … deal? EDIT: lloydie, please mate … enough already. Please go study the world’s recorded history of “money”, “currency”, and usury, going back to Sumer. We’ll discuss further when you have a passable grounding in the subject. migtronixMEMBER March 4, 2014 at 9:52 pm BTW Op8 in your currency world gold still exists for pretty much the same (bullion) purposes it does now right? flyingfox March 4, 2014 at 10:02 pm Oh boy … I should’ve kept out of this but… The rest of the world is a ponzi but BTC less so as fractional reserve banking is harder in BTC. This had me in stitches …. @Op8 Some great points re money vs wealth. At some point, I will get off my arse and articulate some of the stuff re usury etc . In parting …. Ponzi or not, 99.99% of human beings will pick coin 1. And then the world will stop. Just ask Abe … lloydieMEMBER March 4, 2014 at 10:08 pm @flying fox stay on your arse. no one cares about articles on usury. migtronixMEMBER March 4, 2014 at 10:11 pm Of course someone else shows up to hate on BTC while providing nothing to the debate — and still none of you address either the inflation of alternatives or its successful adoption. I promise you I remember very very similar arguments I heard made about how email was just a flash in the pants, I really do. To say nothing of the internet before AOL, the web before ie5, or internet delivered shopping before ebay, or cloud services before amazon, or big data before cloudera, or… flyingfox March 4, 2014 at 10:23 pm @mig Not hating BTC. Just stating some obvious flaws in the argument by another poster. Namely there is no bank or credit in BTC hence no FR. Also FR inflated currency and by definition cannot result in a ponzi. Technically bitcoin is very nice, it solves many challenges and I think by not being backed by anything fulfills the best definition of fiat money. There are however issues as highlighted by Op8. I’ll leave it at that. Opinion8red March 4, 2014 at 10:25 pm Mig, Bugger! The aether stole my reply. Short answer: “Yes”, but with an important caveat. Opinion8red March 4, 2014 at 10:59 pm “deliberately choosing a devaluing unit of account? That’s bizarre. At first glance, yes, it’s bizarre. And yet, history shows that on the few occasions it’s been trialled, it literally produced economic “miracles”. http://www.lietaer.com/2010/03/the-worgl-experiment/ Per one of my earliest posts in this thread, it is why you must have ALL three of the design features I described, in order for the currency to (a) function as currency (medium of exchange, unit of account), and (b) offer long term price stability (thus, economic stability). A thought to ponder on that score. There is absolutely no problem with having a depreciating / decaying currency, provided that (1) you have an infinite source (Stock) of more, AND (2) there are clear prescribed parameters controlling the Flow of new currency — to replace that which has decayed, to balance/support population growth/decline, and, to enable new, productive investment. EDIT: .. and (3) the rate of depreciation / decay is known to everyone. Incidentally Op’s idea is a currency that extinguishes itself so does not necessary inflate way but is absolutely useless – on purpose – for storing saving in.” Very importantly, it also has those other two necessary design features as well. lloydieMEMBER March 4, 2014 at 11:16 pm Here is a problem with devaluing currency. I’m surprised you didn’t see it: NO ONE WANTS TO USE IT. That’s why everyone is buying land, gold and Bitcoins. No one is buying Freicoin, USD and JPY. That’s why central banks are printing and Obama introduced MYRA. That’s it for me. I’m not engaging anymore with “macro specialists” who think they can tell people where they should invest their money. That system is dying. The new system will be protocols and people will vote with their money. No more macro debates. The world will be a better place. flyingfox March 4, 2014 at 11:25 pm @lloydie Here is a problem with devaluing currency. I’m surprised you didn’t see it: NO ONE WANTS TO USE IT. Uh no…. that is the flaw in your logic. You’re confusing money and wealth. No one wants to save in a devaluing currency. It is designed to be like that. Conversely, no one wants to spend a valuing currency. Hence the label of ponzi. migtronixMEMBER March 4, 2014 at 11:35 pm @op8 like I said only good for getting it out of your hands and if there’s an expectation that more “scrip” will be generated by “the authorities” because of rising prices, prices will rise artificially to game the system — basically hording in reverse. Have you thought that all the way through? Perhaps its best example was its short lire, BTC is already 2 years older that Worgl stamps lasted. Just sayin’ EDIT: FF why do you keep saying that? A ponzi is an enterprise where new money pays out senior money — sure as long as no one tries to make the make the claim (i.e. sell Maddoff stock) then the prices goes up via “hording”? What on Earth does transacting or even storing or mining BTC have to do with sucking new money in to pay out the old? And the idea that no one wants to spend is also nonsense because I keep telling you I spent some just today. Why? Because I wanted the purchased item more than holding the coin! flyingfox March 4, 2014 at 11:50 pm @mig It is like/labelled as a ponzi. Doesn’t have to be exactly one. Let’s see, the cost of mining to Satoshi Nakamoto, almost nothing. Cost of mining to you today, similar to the price of BTC. Therefore it makes sense to hoard coins, because by design the cost of getting new coins will go up. Therefore the price of existing coins will go up. Therefore all new comers will be paying more for their coins than the initial users did. drsmithyMEMBER March 5, 2014 at 12:07 am Let’s see, the cost of mining to Satoshi Nakamoto, almost nothing. Cost of mining to you today, similar to the price of BTC. And this is the problem. People who are “rich” in BTC are not rich because of their skill or productivity, but because of luck. Same as with property, really. lloydieMEMBER March 5, 2014 at 1:01 am @ drsmithy Devs buy bitcoins. They then develop software for bitcoin to encourage trade and usage. The value of bitcoins go up, which rewards devs. Some investors see this and buy bitcoins, which pushes up the price of bitcoins. The network is worth something. Bitcoin without the network is just an alt coin. lloydieMEMBER March 5, 2014 at 1:21 am And they will stay rich because the devs are invested. migtronixMEMBER March 5, 2014 at 5:45 am @lloydie: nailed it cheers! “just like property”? Oh really when was the last time you were able to sell a fraction of your property to facilitate trade? *shakes head*. Funny how we create things and bring into existence and when it becomes widely adopted it’s US who haven’t had to work to get a benefit! Unbelievable! And they all just sore they didn’t by @$5. Did anyone address the gaming aspects of WorglCoin, where like the Yellen put there’s an expectation of printing if prices rise so prices rise and force the hand? Did you notice op8 that WorglCoin was backed by 40,000 shillings sitting in a savings account earring offered interest? More I think about I really can’t see what problem you have with interest bearing credit op8 it satisfies all your requirements and no one wants to save in it unless thier getting offered interest. It seems you and flawse are closer than you think. migtronixMEMBER March 5, 2014 at 5:57 am @op8 how does WorglStamp not guarantee hoarding of gold? And can’t see how it holds constant purchasing power – if it did you’d want to hold it – human nature being what it is (yes if cuts both ways) prices will forever escalate on expectation that more will be printed! Gold price will forever rise against WorglStamp and if anyone ever does sell some into the market because of need it’ll be snapped into fewer and fewer hands — really why is that such an awesome system? And as lloydie points out no one wants to use it anyway, they like things with value which is why around the world people like gold an silver (and BTC) drsmithyMEMBER March 5, 2014 at 8:50 am And they will stay rich because the devs are invested. Has nothing to do with the “devs”. Bitcoin has first-mover advantage. Nothing more. Opinion8red March 5, 2014 at 12:10 pm Mig, “if there’s an expectation that more “scrip” will be generated by “the authorities” because of rising prices…” I see you have now seen (today) my linked article that debunks that argument, with real world example… http://www.macrobusiness.com.au/2014/03/victoria-hocks-last-asset-for-population-ponzi/#comment-332029 If the issue of new currency is done in a controlled manner, there is no “rising prices” effect, thus, no consequent problem of incentive to hoard. “Perhaps its best example was its short lire, BTC is already 2 years older that Worgl stamps lasted. Just sayin’” No, that’s a bogus refutation. The Worgl system (and others like it) were only stopped because the Austrian Central Banksters ordered that it be banned. That fact should tell you all you need to know. It works. Spectacularly well. And so, it was a clear and present danger to the banksters monetary monopoly power. “the idea that no one wants to spend is also nonsense because I keep telling you I spent some just today.” Dude, really .. are you reading my responses? Second sentence here … http://www.macrobusiness.com.au/2014/03/william-white-central-banks-making-it-up/#comment-331730 @FF and @drsmithy “it makes sense to hoard coins, because by design the cost of getting new coins will go up.” Exactly! Exactly as per my criticism above, that one of the central DESIGN features of BTC is that “extraction” gets increasingly more difficult as more and more of the total are successfully “mined”. Glad to see from your comments that you chaps “get it”, at least 🙂 @Mig, “how does WorglStamp not guarantee hoarding of gold?” It doesn’t. It’s not intended to. If people want to “save” in gold, or art, or gemstones, or whatever, fine. I am talking about what is needed to design an effective, efficient, long term stable currency. I think you are getting confused over the distinctly different functions “medium of exchange”, “unit of account”, and “store of value”. I’ve seen this confusion time and time again over the years. The reason is this. We have all been born into a system where the concepts of “money” and “currency” have been conflated. We use the terms interchangeably, (un)thinking that they are the same thing. They are not. The reason we do this, is because our “currency” — an intrinsically worthless token, thus, actually quite ideal for use as a medium of exchange and unit of account — has usury offered applied to it. As a result, we unthinkingly see what is in fact an intrinsically worthless token as having a “savings” (storage) value … we think it will “grow” with time, or at very least, not lose purchasing power. We are wrong about that, of course, but that’s another matter. For a “currency” to properly function as a medium of exchange, you have to design it so that most everyone is incentivised to PASS IT ON promptly, rather than hold it. That is why the Miracle of Worgl worked; currency’s proper function was restored. And if folks wish to “save”, then they can exchange their medium of exchange for something else, that is worth “saving”. Opinion8red March 5, 2014 at 12:50 pm lloydie, “That’s it for me. I’m not engaging anymore with “macro specialists” who think they can tell people where they should invest their money.” People’s words will always give them away eventually, if you watch closely enough. lloydieMEMBER March 5, 2014 at 1:20 pm @ Opinion8red and @ drsmithy You guys sound like sore losers that missed out. In case you didn’t realise: gold was money for thousands of years and a store of value. Money can be a store of value and it is with bitcoin. Reality has zoomed way past you guys. Seriously, get out of your ivory towers and see the real world for what it is 😉 Freicoin market cap: $1.4 Million Bitcoin market cap: $7 BILLION Enough said. The market has spoken. No one cares what you both think is right for the world. I vote with my money for bitcoin, just like everyone else. flyingfox March 5, 2014 at 1:40 pm @Op People’s words will always give them away eventually, if you watch closely enough. In this case, from a mile away :D. Opinion8red March 5, 2014 at 1:59 pm @FF … indeed 🙂 EDIT: Err, lloydie … “You guys sound like sore losers that missed out.” … you just proved my (and others) central point about BTC’s design, yet again. That statement is classic “bubble-speak”. JohnRMEMBER March 4, 2014 at 8:54 am Please, enough of these nutjobs denying peer-reviewed orthodoxy… migtronixMEMBER March 4, 2014 at 9:01 am Ssshhhh you’ll wake the babies Opinion8red March 4, 2014 at 10:07 am LOL RobW March 4, 2014 at 11:27 am Who’s denying the peer reviewed process? The problem is economic is and always will be a pseudo/social science. Worsen than that, many of the assumptions and beliefs about human behaviour within economic theory are mind blowing simplistic (even for a social science). Yet laws, policy and business decisions are often made based on a misguided confidence in the reliability of economic theory and modelling. It’s not really surprising so few people saw the GFC coming. migtronixMEMBER March 4, 2014 at 12:04 pm Yet laws, policy and business decisions are often made based on a misguided confidence in the reliability of *cough* MavMEMBER March 4, 2014 at 4:32 pm peer-reviewed orthodoxy .. now that’s a good oxymoronic replacement phrase for circle jerk 🙂 Willy2MEMBER March 4, 2014 at 10:01 am – The McAlvany group has had some very interesting guests in the past. Like Michael Pettis http://mcalvanyweeklycommentary.com/02-13-13/ – A Central Bank (CB) is simply a bank. It has a set very limited amount of (very powerful) tools. Therefore it will tread very carefully before doing anything rash. – A CB can only get credit “out the door” as long as there’s a willing borrower. When there’s no willing borrower then the CB is “dead in the water”. notsofastMEMBER March 4, 2014 at 12:28 pm Tony Abbott and Joe Hockey could do well to listen to this. Particular the part towards the end about how we are too focused on efficiency rather having a stable and robust system. “what ever the organism is it has got be efficient, it has got to be able to survive. But it also has got to be stable and resilient. And the species that actually have done that, with some combination of capacity to cope today and cope with unexpected surprises to cope tomorrow.” “We don’t know enough to be sure that we can maximise anything. So I think if that is case then you should set your sights a little lower. And make sure you don’t do any really serious harm.” Explorer March 4, 2014 at 12:44 pm http://en.wikipedia.org/wiki/Satisficing Getting into the “good enough” area is a lot safer than trying to maximise multiple constraints. Given a choice between a small amount of additional growth and a stable banking system, I’ll take the stable banking system every time. notsofastMEMBER March 4, 2014 at 1:20 pm So would I. But I’m not so sure that was the outcome from the recent G20 meeting, with the finance ministers agreeing to increase what already look like unsustainable growth targets. migtronixMEMBER March 4, 2014 at 1:20 pm Every single time, double goes for Health care — Primum non nocere Geof March 4, 2014 at 12:57 pm William White states at around the 27 minute mark in this interview that he is coming the opinion that we should view the economy more as a complex ecosystem than a machine. These ideas have been developed in great detail by German sociologist Niklas Luhmann with his vast body of work exploring systems theory. For an easy to read introduction to this radically different way of understanding how our society, economy etc actually operate, I highly recommend Hans Georg-Moeller’s book ‘The Radical Luhmann’. migtronixMEMBER March 4, 2014 at 1:22 pm Thanks had not heard of the Georg-Moeller book, Luhmann is very interesting reading. Pfh007MEMBER March 4, 2014 at 1:54 pm Cheers, Another ebook to add to the virtual pile ! Don’t tell the RBA the economy is a fragile complex system, they are quite fond of conducting surgery on the economy by yanking on a single large lever. Forward, backwards, forwards, yank, yank, yank. “If you give it any more Captain Kirk, it will blow” It is not their fault if they kill the patient in the attempt to save it. migtronixMEMBER March 4, 2014 at 2:12 pm Nope coroner will find surgeon operated to best medical practice — it was really all the silly patients fault for having such a pesky-hard-to-get-at tumor. aj. March 4, 2014 at 2:15 pm What is so frustrating about this, is it is just blatantly obvious to everyone that it is a complex fragile system. The Central Bankers are just part of the banking myth that justifies their place in the world. Add this to the list of things we know the solution too but can’t seem to change. Geof March 4, 2014 at 2:45 pm I think ‘fragile’ is the wrong word. Complex systems have usually evolved over long periods of time and are therefore intrinsically resilient. However, our economy, like all living ecosystems has so many interconnections it’s not possible to predict how it will react to changes in any variable such as, for example, monetary policy. As William White states, our current models and theory are totally inadequate – we do not know the solutions. Luhmann suggests we fool ourselves by pretending we can centrally control such hypercomplex systems, rather they evolve in their own way. Andy! March 4, 2014 at 3:38 pm RBA only knows how to use the lever in one direction, and the other times they just stare at it in bewilderment. Pfh007MEMBER March 4, 2014 at 4:23 pm Yes – fragile was a poor word to use. Fragile is a much better description of the result of RBA and much economic policy fiddling. Sensitive is what I had in mind. mikeinnz March 4, 2014 at 5:21 pm George Soros is another who writes about economics and its lack of science. If economies involve participants who are capable of making decisions and changing those decisions at will, then economic models are forced to either have numerous constants or eliminate certain variables to make them work. This in turn makes them a poor predictor of reality. Quant4 March 4, 2014 at 10:11 pm +1, Exactly. It wasn’t until I accepted what I had learned in uni studying economics and applied finance was basically wrong and read George Soros’s books, (and reread them a number of times), that the penny finally dropped for me and I was able to make money in the markets. I would tell any future aspiring market participants to first spend some time down the local TAB or the Crown Casino and just observing how people react in times of greed and fear than wasting time on efficient market hypothesis and fundamental analysis. mikeinnz March 5, 2014 at 8:52 am I’ve only just recently read The Alchemy of Finance. It was a great read because it was written in the 1980s and reflected the economic events of that time. Interesting to compare the similarities and differences between then and now. Obviously some of George’s predictions, such as Japan becoming the world economic power (these days it’s China with that tag), didn’t come to fruition. Unfortunately for George, many people don’t understand his theories which has been a source of frustration for him, I think. aj. March 4, 2014 at 1:32 pm Great listen. DEBT – they all know it but only the most independent can say it. aj. March 4, 2014 at 2:03 pm Thanks for posting hnh – that really was an interesting piece with an humble and erudite chap. Andy! March 4, 2014 at 3:39 pm +1 thanks HnH athalone March 5, 2014 at 1:13 pm Yes, William White is nearly as good as John Exter. Geof March 4, 2014 at 2:32 pm I agree, this is a great interview. It’s not that he says anything that would be unfamiliar to MB readers, it’s rather that he speaks with great clarity on complex issues with an authority that’s grounded in a life-time of experience. Willy2MEMBER March 5, 2014 at 12:54 am Central Banks simply haven’t got experience with the current deflationary environment. They still work with the pre 2008 models.