Daily Archives: December 2, 2013

The Fair Price of a Bitcoin is Zero

Posted on December 2, 2013 by Devin Smith | 82 comments

The virtual currency craze is on a tear, with new virtual currencies emerging every day. The New York Times just ran a series of articles about them last week. “Charles Ponzi would be so proud!” one person appropriately commented at the bottom of this article.

Before going any further, let’s learn a bit more about the bitcoin system (also here and here). There are three components to this system:

– A unit of account—the Bitcoin (BTC)—in which all transactions are recorded and goods and services are priced.

– A payment system, supposedly secured and anonymous.

– A means of payment—bitcoins—that is needed to complete all transactions in the payment system (there are coins of several denominations and the coin with a face value of one BTC is called the “bitcoin”).

Given the craze over bitcoins, their price in US dollars (USD) has soared with a BTC 1 coin going for as much as USD 1200 at one point, leaving Business Insider’s Joe Weisenthal saying:

“At this point, I have zero idea what a ‘fair’ price for Bitcoin is.”

I have an answer to that question, but before I reveal it (pretend you did not read the title of this post), let’s spend a bit of time getting to know the Bitcoin, starting with its payment system.

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82 Comments

Posted in Eric Tymoigne

Tagged bitcoin, fair price

In Search of Sin

Posted on December 2, 2013 by Devin Smith | 7 comments

By Glenn Stehle

When Stephanie Kelton spoke of orthodox economics and its “one size fits all perspective” in her recent lecture at the Fields Institute, it got me to thinking that when it comes to deficit hawks, they really know how to do sin right. And like all good religious fundamentalists, proportionality never enters the picture. One sin takes precedence over all others, others becoming unimportant in the ardor to root out the one true evil.

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7 Comments

Posted in Guest Blogger

Tagged deficit hawks, inflation, one size fits all, sin

MMT 101: Response to the Critics Part 2

Posted on December 2, 2013 by Devin Smith | 51 comments

The Simplest Case: The Circuit with a Consolidated Government

By Eric Tymoigne and L. Randall Wray

[Part I] [Part II] [Part III] [Part IV] [Part V] [Part VI]

MMT is frequently criticized for consolidating the treasury and the central bank. (Palley 2012; JKH 2012a, 2012b; Lavoie 2013; Fiebiger 2012a, 2012b; Rochon and Vernango 2003; Gnos and Rochon 2002). They note that this hypothesis does not describe the current institutional framework of developed countries, and claim it pushes MMT into unnecessary strong logical claims. In this post, we will address these issues by tackling problems surrounding the nature of money and the role of taxes, and by beginning to deal with the consolidation argument.

The theory of the circuit discussed in Part 1 is a good starting point. Like all theories, it simplifies the existing economic system in order to draw causalities from logical reasoning. From the circuit theory, one can better understand Keynes’s point that spending is what makes saving possible (Keynes 1939), and the importance of distinguishing financing (initial finance) from funding (final finance). Parguez (2002) and Bougrine and Seccareccia (2002) have shown how the circuit theory can be extended to include the state, and reached similar conclusions to MMT.

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