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The Buffett Rule

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#21 tastywheat

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Posted 24 April 2017 - 12:32 PM

Take Bitcoin as an example. And other cryptocurrencies which are being mined.

The word infinite is very very precise because when you have undefined values and new assets being "born", there truly is no limit to money, in all it's senses.


The bitcoin protocol specifies that the reward for adding a block will be halved every 210,000 blocks (approximately every four years). Eventually, the reward will decrease to zero, and the limit of 21 million bitcoins will be reached c. 2140; the record keeping will then be rewarded by transaction fees solely.

https://en.m.wikiped...rg/wiki/Bitcoin

So by your 'very very precise' definition, ∞ = 21 million?

#22 Leonid

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Posted 24 April 2017 - 01:05 PM

Bitcoin is one of dozens of cryptocurrencies. With a wildly fluctuating value and uncertain posession across all of them.

Bitcoin's actual asset value also varies by country.

And more cryptocurrencies are being invented.

But dude we don't even need o into cryptocurrencies to see money being made out of thin air.

Every day thousandss of people and companies go into formal bankruptcies with massive debts - IE goods haven't been paid for, but purchased.

The usual procedure is creditors get x cents in the dollar and the person or company is declared bankrupt, sometimes with no further requirement to pay back money owed.

This has the effect of constantly increasing money supply. If someone buys a service but only ends up paying 10c in the dollar for it, 90c in the dollar is effectively created .
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#23 tastywheat

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Posted 24 April 2017 - 02:13 PM

So why didn't printing money work out for 1920s Germany, or modern day Zimbabwe?  Doesn't an infinite creation of money correspond to an infinite decrease in purchasing power?



#24 Leonid

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Posted 24 April 2017 - 02:21 PM

So why didn't printing money work out for 1920s Germany, or modern day Zimbabwe?  Doesn't an infinite creation of money correspond to an infinite decrease in purchasing power?


Because printing physical money and wealth creation are different things.

Printing physical money also doesn't get around structural economic problems.
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#25 tastywheat

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Posted 24 April 2017 - 02:28 PM

Because printing physical money and wealth creation are different things.

 

What definition for wealth are you using, and what separates it from printed money?

 

Is wealth very very precisely an infinite thing?


Edited by tastywheat, 24 April 2017 - 02:31 PM.


#26 Leonid

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Posted 24 April 2017 - 02:30 PM

Because printing physical money and wealth creation are different things.

 
What definition for wealth are you using, and what separates it from printed money?


I dunno how much she's worth now but Gina Rinehart used to be worth $20b.

How much physical money you reckon she has?
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#27 Cybes

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Posted 24 April 2017 - 04:19 PM

I dunno how much she's worth now but Gina Rinehart used to be worth $20b.


How much physical money you reckon she has?

 

You're being precious, Leo.  Whether that money is folding plastic, cold gold, or spinning electrons is immaterial (unintended pun), and if you just dumped a sufficient quantity of any of those forms on the market out of nowhere you can sink it badly enough to need an extended period of recovery.  Kinda like water, it's necessary to life (economic, in this case), but dumping 20b litres (dollars) in one place without prepared drainage is going to fuck shit up for a while.

 

And you are partially correct, in that money is always being created, but that is not worth.  A can of coke was not worth less in 1950 than now - but it cost a helluva lot less.  That's inflation, and it's caused by money being created.  In the above example, you drop $20b in the local economy and prices across the board will go through the roof (at least until the flood waters have drained) because everyone and their dog has $100 notes to blow their nose on and the worth of things has to hurt pretty much the same.


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#28 @~thehung

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Posted 24 April 2017 - 05:49 PM

the prerequisite of any workable medium of exchange is that it should be sufficiently scarce and finite.

 

money is only useful if the relationship between its abstract value, and the instrinsic value it maps to, stays relatively constant and predictable.

 

/captain obvious


no pung intended

#29 Leonid

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Posted 25 April 2017 - 04:25 AM

the prerequisite of any workable medium of exchange is that it should be sufficiently scarce and finite.


True.

Here's the blurb, much better than I can put into words:
http://uk.businessin...currency-2017-2

Ann Pettifor, leading economist and author of "The Production of Money" told Business Insider that bitcoin is flawed as money because it is a "finite asset."

Speaking about the origins and usage of bitcoin, she said: "Bitcoin was invented by some big bad guys on the dark web as a secret currency, for which they could exchange goods and services.

"The idea was similar to the gold standard which is that you would have a finite asset - which is your bitcoin, which would then increase in value over time because it is finite.

"The problem with a finite asset is that the economy is not finite, and if you have a limited amount of money to match this almost unlimited capacity of people in the economy to do things, money doesn't work."


But the medium of exchange we use is money.

However wealth isn't concentrated in money. In fact when we say someone is "worth something", we generally don't mean their bank account. We mean a total sum of assets.

At present there's though to be about $5 trillion in physical currency floating around. That's less than the US economy.

You're being precious, Leo.  Whether that money is folding plastic, cold gold, or spinning electrons is immaterial (unintended pun), and if you just dumped a sufficient quantity of any of those forms on the market out of nowhere you can sink it badly enough to need an extended period of recovery.  Kinda like water, it's necessary to life (economic, in this case), but dumping 20b litres (dollars) in one place without prepared drainage is going to fuck shit up for a while.


As we saw with George Soros fucking up Asia in the late 90s. Yes.

But that doesn't change the fact that money, in the broad sense of the word is infinite. There's no known limit to it's growth or contraction. Theoretically it might be possible for us to go into negative territory with a giant IOU to the Zerg of Alfa Centauri.

And you are partially correct, in that money is always being created, but that is not worth.  A can of coke was not worth less in 1950 than now - but it cost a helluva lot less.


Something is worth no more and no less than what someone is willing to pay for it. In that sense a can of coke is worth exactly the same in 1950 as it is now, all things considered.

It did cost a helluva lot less but not because of inflation.

A can of coke in 1950, in today's dollars cost about 51c US. I don't know if the sizes were the same, but the reason why it's more expensive today is because of other factors.
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#30 tastywheat

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Posted 25 April 2017 - 08:18 AM

Leonid, not finite =! infinite. As Cybes correctly put it, a better term is undefined.

The reason is simple. We have finite amount of resources available. There's only so much matter that we can extract from Earth, and then the solar system. Once we're exhausted the Kuiper belt, and managed to implement a completely closed loop economy, we're pretty much done short of some major upheaval in our understanding of physics.

The human race may extend beyond our system (assuming we survive whatever great filter event that has prevented other species from doing so in our galaxy), but it wouldn't make much sense to link our economies given the decades long delays in communication, and the centuries or millenia long delays in trade. The new systems would start new economies, limited by their own finite availability of energy and matter. Even if we were to become a Type III civilisation, the summation of our enconomies would be constrained below infinity by the heat death of the universe.

It follows then that there is a hard limit to how much food we can produce, a hard population limit, and a hard limit to the number of goods and machines we can build. Sure, there's a lot of potential to expand in the virtual space, but eventually we'll run out of matter to build computers with. Shannon's theory of information makes this pretty clear.

The number is obviously much exponentially larger than what we currently have, but it's clearly not infinite, so it seems like an illogical argument from my perspective.

#31 Cybes

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Posted 25 April 2017 - 08:20 AM

 

the prerequisite of any workable medium of exchange is that it should be sufficiently scarce and finite.


True.
...
"The problem with a finite asset is that the economy is not finite, and if you have a limited amount of money to match this almost unlimited capacity of people in the economy to do things, money doesn't work."

 


Firstly, that quote absolutely contradicts your "True", and secondly it is a prime illustration that economists don't know what infinity is. Nor, apparently, do you.

Infinity may be accurately described as that quantity from which any number other than itself may be subtracted and the result is still infinity; and which when multiplied by any number other than zero is also still infinity. The economy can not, as you have already conceded, cope with too large an influx in too short a time (dumping a few billion on the market was the example from above). That restriction alone eliminates infinity as a result. Moreover, the human race will not last forever, and the current civilisation is unlikely to be the last, which places an undefined but absolute limit on the time available for economic growth; and any amount of growth less than infinity multiplied by a finite amount of time equals a finite final figure.

 

Something is worth no more and no less than what someone is willing to pay for it.


Indeed - which is why the phrase "has to hurt pretty much the same" was used.
 

I don't know if the sizes were the same, but the reason why it's more expensive today is because of other factors.


It was 6.5 fl/oz, and it cost 5c. And yes, other factors are behind much of the price rise (though I don't know what they are - almost every input is cheaper now in adjusted terms), but some of that rise is due to inflation - and the price rise of that commodity itself has contributed to inflation.


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#32 Leonid

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Posted 25 April 2017 - 04:15 PM

You're talking about speed.

That is not a definition of infinity. There is no known upper bound in the economy.

Yes you can crash it by injecting factors, just as you can invert mathematical infinity by multiplying it by -1.

But on its own, plodding along, there is no know upper bound of the economy.

And because there is no known upper bound, and no known way to subtract a finite amount from it whereby that infinity is reduced to something more finite, the definition holds.

You really are violating your own definition which you just quoted.

I'll give you an example.

Given the world's economy today, what is the finite value of assets if someone dumped $20b worth of Apple stock?
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#33 Leonid

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Posted 25 April 2017 - 04:51 PM


The second problem that you and tasty are ignoring is that you think that "undefined" and "infinity" are separate definitions.

This is far from the truth.

Infinity is not a "well-defined number". There's no non-infinite sufficiently large number, after which the next number along is infinity.

Infinity, is undefined.

If you have a number that is incalculable or cannot be undefined, you're quite a way along to the definition of infinity.

Essentially, for pedestrian purposes, "infinity" is not a number. It's a concept.

And because it's a concept the only question that needs asking, is there any limit to economic growth?

There is not: http://freakonomics....ever-of-course/

This is especially true when you add the fact that we'll likely not be planet-bound in the next 100 years, in an uncountably infinite universe of planets.

And so we come back to Betty and Warren.

Since the economy is infinite, then money in it's broadest sense is a countably infinite set.
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"If liberty means anything, it means the right to tell people what they do not want to hear." - George Orwell

#34 tastywheat

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Posted 25 April 2017 - 05:21 PM

Ok Leonid, let's work through this logic one argument at a time, to see how it's possible to have such wildly differing perspectives.

  1. Do you agree with Shannon's Information Theory that states there are hard limits to the amount of information that can be encoded from a given amount of variables?
  2. Do you agree that it's impossible for humans to harvest an infinite amount of matter?  If not, what evidence or theory are you working from to justify this response?
  3. Do you agree with Cantor's uncountable set as proof of an uncountable infinity, which you probably would have studied and used to some extent in your engineering degree if you participated in the prescribed maths courses?
  4. Do you agree that for physical or virtual money to hold value, it needs to be exchangeable for goods or services?
  5. Do you agree that money that is infinitely leveraged against a finite amount of goods and services, is mathematically equivalent to money that can't be exchanged for goods or services? i.e. ∞ - c = ∞, where ∞ is uncountable, and 'c' is a natural number.

Edited by tastywheat, 25 April 2017 - 05:28 PM.


#35 tastywheat

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Posted 25 April 2017 - 05:39 PM

 

"We have a finite environment—the planet. Anyone who thinks that you can have infinite growth in a finite environment is either a madman or an economist."

 

- David Attenborough

 

Economists aren't scientists (though they might employ limited scientific methods), and I'm more inclined to believe evidence based arguments.



#36 TheManFromPOST

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Posted 25 April 2017 - 05:58 PM

My head hurts



#37 Leonid

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Posted 25 April 2017 - 06:18 PM


There is not: http://freakonomics....ever-of-course/

 

"We have a finite environmentthe planet. Anyone who thinks that you can have infinite growth in a finite environment is either a madman or an economist."

 

- David Attenborough

 

Economists aren't scientists (though they might employ limited scientific methods), and I'm more inclined to believe evidence based arguments.

If economists were scientists, they wouldn't have so many differing opinions that are wrong 50% of the time.

And if scientists were economists there'd be more disagreement about scientific evidence such as the afrom-american brain being smaller, eugenics, etc.

Leave the economics up to the economists and the science to the scientists.


Ok Leonid, let's work through this logic one argument at a time, to see how it's possible to have such wildly differing perspectives.

  • Do you agree with Shannon's Information Theory that states there are hard limits to the amount of information that can be encoded from a given amount of variables?
  • Do you agree that it's impossible for humans to harvest an infinite amount of matter?  If not, what evidence or theory are you working from to justify this response?
  • Do you agree with Cantor's uncountable set as proof of an uncountable infinity, which you probably would have studied and used to some extent in your engineering degree if you participated in the prescribed maths courses?
  • Do you agree that for physical or virtual money to hold value, it needs to be exchangeable for goods or services?
  • Do you agree that money that is infinitely leveraged against a finite amount of goods and services, is mathematically equivalent to money that can't be exchanged for goods or services? i.e. ∞ - c = ∞, where ∞ is uncountable, and 'c' is a natural number.

1. Sure but as relevant to the topic as the question of what came first, chicken or egg?
2. False. If there is an infinite amount of matter and we can harvest it then there is by definition no upper bound to the matter we can harvest. Duh.
3. Yes.
4. Nope. Money can be made out of money. IE not a good or service, but a means of exchange. Also money doesn't need to hold value - it's elastic.
I know you struggle with the concept but money is worth exactly the same as a product - what someone is willing to exchange for it. For example, I have a white gold Magen David purchased on Mt Sinai. It cost about $300 at the time. Its value to me is unlimited as it was given to me by my wife as her first ever present.
So while you can go to Israel and buy an exact copy for whatever $300+inflation+conversion is, you won't be able to buy mine.
I value your money inferior to its worth relative to the object you wish to exchange it for.
5. There is not a finite amount of goods and services. Your premise is wrong.
"I'd rather die standing up than live on my knees." - Stephane Charbonnier (1967-2015)

"If liberty means anything, it means the right to tell people what they do not want to hear." - George Orwell

#38 Cybes

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Posted 25 April 2017 - 06:27 PM

2. False. If there is an infinite amount of matter and we can harvest it then there is by definition no upper bound to the matter we can harvest. Duh.

 

There is NOT an infinite amount of matter.  Nor is any but a tiny fraction of what there is accessible to humans before the heat death of the universe.


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#39 tastywheat

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Posted 25 April 2017 - 06:53 PM

2. False. If there is an infinite amount of matter and we can harvest it then there is by definition no upper bound to the matter we can harvest. Duh.


This is the point of core disagreement then. If we were able to harvest an infinite amount of matter, then I agree there could be infinite growth.

#40 Leonid

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Posted 07 May 2017 - 01:32 AM

There is NOT an infinite amount of matter.


Do we know the size of the universe or what approximately 96% of it contains? No.
"I'd rather die standing up than live on my knees." - Stephane Charbonnier (1967-2015)

"If liberty means anything, it means the right to tell people what they do not want to hear." - George Orwell




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