RE: The Art of Penis Negotiation - Banning Bitcoin

[Jetrpg22]

Hi Stefan and anyone who might be reading this,

I am posting this regarding the The Art of Penis Negotiation show, and the Banning Bitcoin caller.

 

I am not going to defend or reexamine all the points in the call but a basic reality of economics that Stefan might have missed.

Stefan makes claims that a government ban would not decrease bitcoin value/price for a multitude of reasons but i feel they might miss the mark to a degree.

 

The commodity of currency would be worth far less when its ability to freely be used as currency is hampered. Is this logical? If yes, then the caller is correct and not Stefan. Let me expound.

Lets start with this analogy: if weed no longer got you high or it would take an entire 8-ball to feel a high, this would decrease the value of those drugs to consumers (thus decrease their value as a commodity). A result being, these drugs' profitability would plummet and divert interest to other alternatives (even if supply remained the same, its value or usefulness is lowered). If the drug is still useful (can still get you high MAnnnn), then when its price increases, its value doesn't. It cost more time/wealth to produce and procure and thus may divert interest to other drugs, but the drug would maintain the innate value of its use.

Ex. I have $200 1 oz of weed it gets me this high, but then government makes it illegal. Prices increase the same 1oz of weed still gets me the same high but now costs $250. The vlaue of the drug to the consumer doesn't change the cost does

 

So now lets do the same with bitcoin.

The value of bitcoin is its stable supply, uses of currency in trade and exchange, easy of transfer, security of wealth, amongst other uses of similar nature. So if government makes it harder to use bitcoin by destroys wealth related to it (stealing/destroying some of it), banning its use at local and reputable stores, creating legal threat associated with usage, etc then that would destroy the value of a currency; this is its function. Unlike drugs whose function is a high etc. which restrictions of availability do not largely effect, Bit coins innate value as a medium of exchange would actually be decreased (it harder to use it to exchange wealth/value). In this it differs from most commodities, but is similar to any currency. Do to this Bitcoin would most definitely lose value unless a large percentage of a population chose to ignore government force... which is not a likely reality, currently.

Ex. I have $900 in 1 bitcoin that i can freely exchange, but then the government bans it. Now i still have 1 bitcoin but far less people who will take it becuase i can no longer as freely exchange it and its value was debased by government stealing it. This would make that 1 bitcoin worth less than $900 dollars as the actuall usefulness (or possible future usefullness) to the consumer has been greatly decreased.

 

This is my perspective from my understanding of human interaction, let me know what you guys think.

[cynicist]

This would make that 1 bitcoin worth less than $900 dollars as the actuall usefulness (or possible future usefullness) to the consumer has been greatly decreased.

 

It's not like bitcoin is exactly mainstream at the moment. For the vast majority of people it is useless today (as they have no idea how it works or how to use it) so I don't see how banning it would make the situation worse. Now if it were banned, that would increase its value for those currently using it. The utility of transferring money electronically with minimal transaction fees is huge. I think the only reason it's not bigger is that many people see it as a scam or a bubble. If the government were to ban it (like Russia did) that would be an affirmation that it is a disruptive technology and criminals would be even more into it than they already are. 

 

The commodity of currency would be worth far less when its ability to freely be used as currency is hampered. Is this logical?

 

All things being equal, but they never are. You should be comparing a banned bitcoin to the dollar. A ban won't stop individual transactions, currency transfer, value store, etc. As people watch the price of things in dollars going up and the price of things in a bitcoin black market going down, which do you think they will gravitate towards?

 

 

I haven't heard the call yet so I'll come back after I hear the arguments in more detail but they seem pretty weak at first glance.

[Fast and steady]

I'm not an investor in bitcoin myself, although I do find it very interesting and in many ways hope it succeeds.

 

This call was interesting to me because I've had some of the same concerns about bitcoin as the caller. I think Stef's arguments made logical sense to me, although I'm still not completely convinced.

 

One concern that I have that I don't think was addressed (if it was, I missed it) is that the Government doesn't necessarily have to *ban* bitcoin, they could instead try and scare people off of it by manipulating the market in the same ways that many people are sure that they manipulate the gold market.

 

Okay, okay, total conspiracy theory - but I don't think it's totally out of the realm of possibility.

 

Will it happen? Will they be successful? I don't know. Then again, if it is revealed that the Government is doing this, it has the potential to backfire on them just as much as banning it might.

 

As far as banning it goes, I think Stef made a good point in that the Government banning things in the past (alcohol, drugs, etc) has achieved exactly the opposite effect and that this may be a good indication that the banning of bitcoin would result in the same happening.

 

I was about to argue that the Government could manipulate people into believing that bitcoin was only used by bad people to launder money (I use that as an example because they are already using that sort of argument) and use that as an excuse to ban it. However, I just remembered that they did the same for alcohol and drugs as well. The premise behind prohibition was that alcohol was being used by evil exploiters to keep the poor (mostly Irish) class down. The excuse for the War on Drugs was likely much the same, "drugs are bad, mmmkay?" and yet the value of drugs and alcohol went through the roof in response.

 

I suppose one argument that Stef seemed to overlook is that it turned ordinary citizens who continued to make/use drugs & alcohol into criminals (at least as far as society was concerned), and the same would happen to bitcoin investors if the Government did ban bitcoin. So if I was a bitcoin investor, sure, the value of my bitcoin would go up... but I'd need to be able to sell that bitcoin in order to realize that increase in value which puts me in a potentially precarious position, not wanting to end up in a rape cage.

 

Since bitcoin is virtual currency that can theoretically be traded anonymously online, this might prove to not be an issue, but then again, with what has come out about the NSA's spying tactics, the fact that they have bribed and/or injected double agents into various hardware and software companies to compromise crypto PRNGs in order to make it easier for the NSA to exploit modern cryptography, I'm a bit concerned about what I *don't* know about what they are capable of.

 

My other remaining concern is the speculatory nature of the bitcoin market right now. I think this will eventually settle and when that happens, this will no longer be as big of a concern (it'll be no more a concern than any other market eventually, I imagine), so I'm kind of waiting to see what happens.

[Jetrpg22]

Thanks Cynicist for your reply.

"It's not like bitcoin is exactly mainstream at the moment. For the vast majority of people it is useless today (as they have no idea how it works or how to use it) so I don't see how banning it would make the situation worse. Now if it were banned, that would increase its value for those currently using it. The utility of transferring money electronically with minimal transaction fees is huge. I think the only reason it's not bigger is that many people see it as a scam or a bubble. If the government were to ban it (like Russia did) that would be an affirmation that it is a disruptive technology and criminals would be even more into it than they already are. "

 

You're correct in assessing that the users who currently hold bitcoin would not greatly be effect by a ban directly. And that is because the majority of current bitcoin holders hold them as a commodity investment. But anything that directly effects their future usefulness as a currency would make possible future value far lower thus lowering the current value (speculated future wealth) now. The issue is most people using bitcoin do not use it as a currency (to obtain and exchange goods) they use it to store wealth (as a commodity with future value). Because a ban would inhibit bitcoins actual ability to be used as a method of free exchange, people will react appropriately and value it correctly as less valuable (And it would because you have the threat of legal action, no local stores are going to take it, etc.).
 

"All things being equal, but they never are. You should be comparing a banned bitcoin to the dollar. A ban won't stop individual transactions, currency transfer, value store, etc. As people watch the price of things in dollars going up and the price of things in a bitcoin black market going down, which do you think they will gravitate towards?"

 

In the case of bitcoin, a ban would make the the possibility of the use of bitcoin to freely be used in exchange far less likely, easy, and safe while increasing the opportunity cost of its use with legal threats and less convenience
Lets look at the example of a dollar, while the dollars value is being debased (inflation) it still maintains the same utility as a currency, the ability to use it to exchange goods has not been greatly altered (until you need wheelbarrows of it to buy stuff; so some lack of ability to store wealth). Now say china takes the US over and states, 'now you use the Won', the value of the dollar will plummet. This is because its not backed by any physical commodity (just as bitcoin is not) and assumptions of future value would be low indeed (the government supporting its value is now gone). The key for currencies is the question, "will i be able to exchange this thing for another thing"? Acting as if a government ban on bitcoins wouldn't decrease its value is not economically or logically sound. It doesn't function as say beds, medicine, or a drugs that all have uses other than for the purpose of exchange that people would demand them for; in which if these were banned, the prices would increase because the demand for the actual function of the good remains.

Your stating that if bitcoins were made illegal, that no one would stop using them? Otherwise, it would inhibit individual transactions,becuase most people follow rules. I have read that 0.5% of bitcoins are used in the illicit drug trade, so i will assume that most bitcoins are not held by thugs, gangs, and black marketers. As for your second question, if they were allowed to freely exchange the bitcoin then people would be liekly to place their wealth in bitcoins to preserve their wealth. But in the case of a ban, future pleading aside, its not very useful when you cannot buy food with them, cannot go to the local car dealership, etc. Furthermore, if the gov. is seizing or destroying bitcoins when it can find them that is a threat of loss of wealth.

 

"I haven't heard the call yet so I'll come back after I hear the arguments in more detail but they seem pretty weak at first glance."

 

Well what do you think, am i still far off base?

 

Also thanks to  RagnarDanneskjold for your comments, i believe in my orginal and more in this post, I have argued why a currency's value maybe effected by bans differently whan other comodities and how that would interact with the current uses of it and its speculation of future value. I mean i don't know what would happen this is assumption based off of my economic understanding.

[Fast and steady]

Furthermore, if the gov. is seizing or destroying bitcoins when it can find them that is a threat of loss of wealth.

 

 

I'm not sure that is really a valid concern. They can't realistically seize bitcoins or destroy them as you could store them on your computer, out of their reach (that is, unless they raid your home and steal your computer where you are storing your wallet).

 

Edit: from what I understand, you could also just write some sort of key down on a piece of paper as well?

 

Since I haven't actually bought any bitcoins or installed the software, I'm not 100% clear on that.

[cynicist]

Because a ban would inhibit bitcoins actual ability to be used as a method of free exchange, people will react appropriately and value it correctly as less valuable (And it would because you have the threat of legal action, no local stores are going to take it, etc.). 

 

You are talking about inhibiting 'future potential'. People use it to trade at the individual level now and that wouldn't change. I mean I agree with you that its value would immediately drop after a ban due to perception, just like gold drops whenever the stock market seems to be doing well, but as things get worse its value would go up despite the ban. 

 

In the case of bitcoin, a ban would make the the possibility of the use of bitcoin to freely be used in exchange far less likely, easy, and safe while increasing the opportunity cost of its use with legal threats and less convenienceLets look at the example of a dollar, while the dollars value is being debased (inflation) it still maintains the same utility as a currency, the ability to use it to exchange goods has not been greatly altered (until you need wheelbarrows of it to buy stuff; so some lack of ability to store wealth). Now say china takes the US over and states, 'now you use the Won', the value of the dollar will plummet. This is because its not backed by any physical commodity (just as bitcoin is not) and assumptions of future value would be low indeed (the government supporting its value is now gone). The key for currencies is the question, "will i be able to exchange this thing for another thing"? Acting as if a government ban on bitcoins wouldn't decrease its value is not economically or logically sound. It doesn't function as say beds, medicine, or a drugs that all have uses other than for the purpose of exchange that people would demand them for; in which if these were banned, the prices would increase because the demand for the actual function of the good remains.

 

Like you said, the reason that the value of the dollar would plummet in your scenario is because a fiat currency is one that has value by decree of the government, so when the government disappears then so does the value. The mistake you are making is saying that bitcoin is somehow equivalent to this. Yeah a ban would decrease its potential value relative to a non-banned bitcoin in the minds of some consumers, but in reality none of its utility would be diminished like a fiat currency so those that do use it would continue if they think the cost of the risk does not outweigh the benefit of the utility.

 

Illegal downloading is a great example of this. People ignore the law and download music anyway because the risk is low and the reward is high. The government would spend itself into oblivion trying to prosecute people for it.

 

I agree that for a currency the key question is, "Will I be able to exchange this thing for another thing?", but disagree that a ban has an effect on this in the present since bitcoin is used mostly for individual trades.

 

As for your second question, if they were allowed to freely exchange the bitcoin then people would be liekly to place their wealth in bitcoins to preserve their wealth. But in the case of a ban, future pleading aside, its not very useful when you cannot buy food with them, cannot go to the local car dealership, etc. Furthermore, if the gov. is seizing or destroying bitcoins when it can find them that is a threat of loss of wealth.

 

What about a ban stops people from trading bitcoins for food or cars? And how is the government going to seize anyone's bitcoins? The only way they could do that is if you gave them up yourself. (considering that they are digital and can be stored anywhere, it would be trivially easy to hide them)

I'm not sure that is really a valid concern. They can't realistically seize bitcoins or destroy them as you could store them on your computer, out of their reach (that is, unless they raid your home and steal your computer where you are storing your wallet).

 

Edit: from what I understand, you could also just write some sort of key down on a piece of paper as well?

 

Since I haven't actually bought any bitcoins or installed the software, I'm not 100% clear on that.

 

If you encrypt your wallet then they can't seize your coins and if you make backups of your encrypted wallet then they can't destroy them either.

[Fast and steady]

 

 

If you encrypt your wallet then they can't seize your coins and if you make backups of your encrypted wallet then they can't destroy them either.

 

Yea, good point.

[cynicist]

Ok just listened to the call in question. I think the caller had a great point about how governments can affect the production of heroin through things like burning poppy fields, which would increase its price (since the producers need to take into account the cost of the damage) but didn't make a case for why the use of bitcoin would go down if it were banned. Maybe some people would be afraid of the legal ramifications but anyone who understands bitcoin knows how difficult it would be for the government to control the currency in any meaningful way.

 

I did think it was interesting that Stefan a similar point to my own, that banning it would be kind of counterproductive since it would just make people pay more attention to it and the reasons the US banned it. 

[Jetrpg22]

Yea, good point.

 

I wasn't going to go into this but i figured in the spirit of accuracy i will.

They can; if a man points a gun at you and asks for your wallet you give it to them. If the gov. imprisons you and tells you to give them your account info you will. Its that simple, and exchanges well they can capture those also. If they take or delete the coins is up to them.

 

One the supply is finite (we have not reached that limit yet but it is known). This is great for current holders as the value will greatly increase if usage become popular. However, you guys are still ignoring the point/function/value of a bitcoin. Its an intermediary for the use of the exchange of goods, anything that impedes that function, which a gov. ban 100% necessarily does, will decrease its utility and value to the consumer. As a result, a gov. ban HAS to decrease its value, its literally a tautology and formulaic. Listen to people talk of the positives of bitcoin, they are highly efficient to trade, dividable, etc and as soon as a ban is in place you impact bitcoins ease of trade and utility ... its inherent value (its value as a commodity). Now that doesn't mean that another currency will be so shit that the value of a bitcoin would suffer less loss of value in comparison, but nevertheless it would have been worth more had the ban not occurred.

I seriously encourage some thought on this... i am not attempting to attack or besmirch bitcoins or anyone; i care about accuracy.

 

I agree that banning it would again show the weakness of the dollar.. but it has never stopped the government. They have been banning gold based currencies for awhile now with no major issue, as well as, a plethora of other things.... no large amount of the population cares.

The best thing we could do is get government officials invested in bitcoins they will protect our wealth is their wealth is right long side it

[cynicist]

Listen to people talk of the positives of bitcoin, they are highly efficient to trade, dividable, etc and as soon as a ban is in place you impact bitcoins ease of trade and utility ... its inherent value (its value as a commodity). Now that doesn't mean that another currency will be so shit that the value of a bitcoin would suffer less loss of value in comparison, but nevertheless it would have been worth more had the ban not occurred.

I seriously encourage some thought on this... i am not attempting to attack or besmirch bitcoins or anyone; i care about accuracy.

 

I'm glad you mentioned accuracy, as I'm also interested in this. How does a ban on bitcoin impact the ease of trading coins or its utility in any way?

[Jetrpg22]

I'm glad you mentioned accuracy, as I'm also interested in this. How does a ban on bitcoin impact the ease of trading coins or its utility in any way?

 

In the same way that i cannot go to my local supermarket and buy a lb of cocaine, the same way that the feds inhibit the ease of trading pedophilia based porn, the same way in that i can no longer go to a retail store and buy a  three wheeler, and etc. The same way in which a store will not accept say British lb.s thus inside the us its useless as a currency (save the black market) but can still hold value.

I believe i have outlined much of this already, if a bitcoin is high efficient because of the low cost of exchange, this cost is greatly increased by the threat of arrest, having to conduct oneself secretly, etc. Thats a direct impact to the cost effectiveness of a bitcoin (opportunity cost)... You can read above why this would impact speculated value (which is the major value of a bitcoin now). So without a ban i would be able to exchange in the above ways, go to walmart trade a fraction of a bitcoin for a shopping cart full of food. A ban would stop that interaction and i would require intermediaries and the like making it far more difficult to use bitcoin as a currency (and far less efficient).

 

Well if i still didn't make it clear this is my failing. I'll end with saying it doesn't matter if bitcoins maintain their value better than another currency (that is not the argument), this issue addressed here is would a ban decrease the value of a bitcoin. I believe that i have argued well how it would (not that it would have no value, just less). If you disagree could you tell me why, because i don't understand the counterargument.

[cynicist]

In the same way that i cannot go to my local supermarket and buy a lb of cocaine, the same way that the feds inhibit the ease of trading pedophilia based porn, the same way in that i can no longer go to a retail store and buy a  three wheeler, and etc. The same way in which a store will not accept say British lb.s thus inside the us its useless as a currency (save the black market) but can still hold value.

 

But you already can't go to a retail store and use bitcoin, so how does a ban affect that?

I believe i have outlined much of this already, if a bitcoin is high efficient because of the low cost of exchange, this cost is greatly increased by the threat of arrest, having to conduct oneself secretly, etc. Thats a direct impact to the cost effectiveness of a bitcoin (opportunity cost)... 

 

And yet none of that applies to downloading mp3s, which are an electronic item banned in exactly the same way you are talking about. It hasn't affected illegal downloading, in fact illegal downloading went up despite legal threats. 

[Fast and steady]

FWIW, I had similar concerns as Jetrpg22.

 

Thanks, cynicist, you make some reasonable points in addressing my concerns, at least. I don't really expect that the Government will ban it, for me, that was more of a worst-case scenario.

 

As an aside, since you mentioned illegal mp3 downloads, once Amazon started offering them at $0.99, I felt no temptation to pirate them.

 

I still hesitate to invest in bitcoin, but at this point it's more about considering risk as if it were a normal stock. The way you deal with that, of course, is to invest small amounts here and there and see how it pans out.

 

I think that as more retailers begin to accept bitcoin (a few already do), the value of bitcoin will rise because it'll become more useful and also more mainstream. As it becomes more mainstream, it'll be harder for the Government to discredit it and/or ban it. Just my thoughts...

[cynicist]

Yeah I agree completely. To be clear I also think the value of bitcoin would go up tremendously if it was adopted by retailers and a ban clearly would prevent that from happening. I just don't think banning somehow diminishes bitcoin as it is used currently by individuals, since a ban has zero effect on the actual utility of bitcoin. (just its adoption) So it certainly limits the potential value to people, but that's not what Jetrpg is arguing.

 

Just like the government can't effectively stop people from copying bits from computer to computer in the form of copyrighted works they have no power to stop bitcoin or even affect its utility.

[Jetrpg22]

Yeah I agree completely. To be clear I also think the value of bitcoin would go up tremendously if it was adopted by retailers and a ban clearly would prevent that from happening. I just don't think banning somehow diminishes bitcoin as it is used currently by individuals, since a ban has zero effect on the actual utility of bitcoin. (just its adoption) So it certainly limits the potential value to people, but that's not what Jetrpg is arguing.

 

Just like the government can't effectively stop people from copying bits from computer to computer in the form of copyrighted works they have no power to stop bitcoin or even affect its utility.

Because as of currently most bitcoins are not used as a commodity/currency (for its own use or for the exchange of goods) but as a investment on speculated future value. Thus baked in to their current value is the possibility of future retail use.

But that is despite the point, if "I also think the value of bitcoin would go up tremendously if it was adopted by retailers" is true then a ban would make bitcoins worth less then they would be. Stefan's position was the opposite in the call.

 

"So it certainly limits the potential value to people, but that's not what Jetrpg is arguing."

PS that is what i am arguing with the caveat that current bitcoin prices reflect, to a degree, speculated future value.

 

Thanks for all the input.

[cynicist]

PS that is what i am arguing with the caveat that current bitcoin prices reflect, to a degree, speculated future value.

 

Ah, I understand your argument now. Sorry but I was a bit confused on exactly what you meant, but now that I get it I have to disagree that Stefan's position was the opposite. He said that bitcoin's value would go up after a ban, he didn't say that it wouldn't go up even further if retailers adopted it. Does that make sense? He wasn't talking about the potential for bitcoin if it went mainstream years into the future, he meant the more immediate effect a ban would have on bitcoin's current state. 

 

I don't know if he's right, personally I think it would tumble a bit and then rise higher, but that's also partly because I don't think bitcoin is mostly "an investment on speculated future value", since that time has kind of passed. Getting rich off bitcoin isn't going to happen anytime soon, the economy would need to get a lot worse for that.

[Josh F]

Any barriers to entry increase the costs.  If mining equipment or just using the network was criminalized, acquiring bitcoin would be higher risk and more difficult to acquire. Bitcoins black-market value is not as a long term store of wealth or its ability to purchase goods, but a nearly free way to launder money.

[Brentb]

A U.S. ban on bitcoin would make the value of dollar drop because it would elevate bitcoin as viable threat to the dollar - making the dollar look weak. Even if the U.S. government could succeed at preventing bitcoin exchange among U.S. citizens - it can't prevent it abroad.

 

All those who are not forced to use U.S. dollars will not see the U.S. dollar as strong or stable if the U.S. government has to force people to use it. Good luck selling Treasury bonds in that environment.

 

Bitcoin would have a lot of volatility in the case of a ban, and it would be more difficult to know it's value, but in the long term it would retain it's value better than any government currency alternative.