I truly appreciate your experience and cynicism here. People who haven't worked in financial markets have a hard time appreciating how deep the muck can get. Which makes them especially valuable suckers for the unregulated markets.
> People who haven't worked in financial markets have a hard time appreciating how deep the muck can get.
That's the main reason why I find the battle cry of "decentralization" so comically ironic. No government can control crypto, how awesome and empowering!
When the truth is that the vast amount of control that we've seen develop in the past century (and especially in the past two decades) were just to protect people from said muck.
[Edit] Or, as a practical comparison, think of the act of raising money from investors.
Centralized: Please file a detailed report with the relevant authority in which you list, among other things, all possible risks and challenges that you foresee and how this could harm investors.
Decentralized: LOL YOU APES, DIAMOND HANDS TO THE MOON!
> the truth is that the vast amount of control that we've seen develop in the past century (and especially in the past two decades) were just to protect people from said muck.
Think of the children!
Do you really believe the vast amount of centralized control is to protect the poor stupid people? I think this is an incredibly naive and gullible take. The vast amount of controls in place are to solidify power amongst the powerful.
Two things can be true at the same time. Power systems do tend to work for the powerful. But that doesn't mean they can't also be valuable to everybody. Or even valuable to the average person much more than the powerful person.
Look, for example, at food regulation. Anybody who has worked in a restaurant can tell you a) how important food safety is, and b) how much health department regulations contribute to keeping them effective. That's good for almost everybody, but it's most valuable to those who buy food from low-end restaurants, where the incentive to cheat is strongest and where the clientele is low on political power.
It seems pretty hard to me to look at charts of inflation, income inequality, and quantitative easing and compare them to stock market values and not see how the system is allowing the rich and powerful to use inflation to suck money away from everyone not heavily in the market (especially the poor as inflation is a highly regressive tax) and into their own pockets through increases in valuation.
And then look at the barriers that regulation throws against the average person to keep them from the most lucrative investments (like required accreditation) and protecting the people stops feeling like a primary (or even tertiary) goal.
I don't doubt that initial push for regulation was at least in part to protect people from the sharks, but it sure doesn't seem like that's the driving motivation anymore.
> ...the system is allowing the rich and powerful to use inflation to suck money away from everyone not heavily in the market (especially the poor as inflation is a highly regressive tax) and into their own pockets through increases in valuation.
It's not that simple. You're talking like poor people are debt-free and keep jealously-guarded meager savings in cash. However, chances are they have far more debt than assets and no savings whatsoever, so inflation doesn't hurt them (so long as their wages keep up) and may even help them.
I'm not sure if this actually applies to you, but your comment reads a bit like cherry-picking in the name of some ideological fixation (e.g. crypto/gold bug opposition to the idea of inflation. leading to attempts to paint inflation as the worst thing ever).
> look at the barriers that regulation throws against the average person to keep them from the most lucrative investments (like required accreditation)
If anything, the accredited investor standard is proof that regulation doesn't favor the powerful. Taken as a whole, those aren't the most lucrative investments. They're the riskiest. The whole theory behind it is that if somebody is rich enough we won't try to protect them as much from scams; they're presumed to be sufficiently sophisticated and well resourced that it's their own problem.
I agree inflation is a problem, but you can't use that to prove much about the regulatory system, because a) inflation was low and stable for a long time, only increasing due to pandemic-driven disruptions, b) the wealthy are the ones yelling the loudest about pinching off inflation pronto, and c) the classic way to stop an inflationary surge is performative "austerity", which is much more disruptive to the poor than to the rich.
> Taken as a whole, those aren't the most lucrative investments. They're the riskiest.
I'm not an accredited investor but I did mountains of research on it years ago, and most of the time risk does correlate with reward. Also most of the most lucrative investments where people can get really rich are startup investments, which are off limits to most people who aren't already rich. There is definitely a ton of risk in startups, but also so much reward.
I think a better system for protecting people would be education/certification based. If the person truly understands the risk, they shouldn't be stopped by the government from investing IMHO.
I think the reason many of the richest people want inflation to stop is because it forces them into riskier investments in order to stay ahead of inflation. They care a great deal about maintaining wealth and high inflation erases a big class of "safer" investments from their list of options.
Risk correlates with reward, sure. On a very general basis. But there are a ton of specific exceptions to that.
There's plenty of reason to think that opportunities to "get really rich" offered to unsophisticated people without a lot of money will be a big exception.
Just think of it from a startup's point of view. Would you want to take a lot of small checks from people who don't know what they're doing and for whom it's a major portion of their assets? I wouldn't, because it's always a bad idea for people to gamble what they can't afford to lose. I'd feel bad taking their money for something I know has a small chance of success. And just as a practical matter it's low return on effort.
The people who are most eager to take money like that? Idiots, goofs, and fraudsters who cannot get money from serious investors who know better.
Is it? I think a takeaway from Piketty's book was that inflation was one of the rare factors that slowed down or reversed wealth inequality. Intuitively it would make sense that people drowning in debt benefit from (moderate) inflation, especially if low wages get bumped in the process.
Yes that's a great point, as long as debt interest rates are fixed, inflation is good for people in debt. It's especially great for most home owners, but home ownership is largely a middle-class luxury.
But that said a lot of the really bad debt that poor people have is variable rate anyway (and usually outrageous) like credit cards, payday loans, etc.
Re wages: they tend to be sticky. Wages will get bumped up but it's almost always after the fact as a result of government reported inflation rates. So people have been feeling the inflation for a while by the time wages "catch up." And the government inflation rates are notoriously underestimates so in reality wages tend to stagnate and "drop" (they are the same number but buying power has dropped) until market pressures force them to rise.
It would definitely be interesting to hear about past examples where income inequality improved under inflation. In Weimar and Venezuela that doesn't seem to have happened. The poor there end up starving and using leaves for toilet paper. The really wealthy have access to international investing so they're protecting against inflation.
> Yes that's a great point, as long as debt interest rates are fixed, inflation is good for people in debt.
Variable interest rates should be illegal anyway. How can you commit to paying next year a sum that you cannot know? It works somewhat as long as everything is stable, but is a significant fragilisation factor once things go awry. Which they are bound to do, eventually. The answer to that is not to create even more instability in the form of speculative cryptocurrencies; it’s to have better regulations.
> Re wages: they tend to be sticky. Wages will get bumped up but it's almost always after the fact as a result of government reported inflation rates.
Also, wages in real terms haven’t gone up for 40 to 50 years now. Inflation is a tax on savings, so it still penalises the wealthy, but it is not as helpful for the middle class as it once was.
> It would definitely be interesting to hear about past examples where income inequality improved under inflation.
Piketty’s book has a couple of them. The gist of it is that most high inflation events reduce inequality by burning money. People who don’t have any are not burnt. Of course it does not mean that it is pleasant for them, or that the wealthy end up starving. But it does reduce inequality.
A total war is a good example as well, because then the state is going to take the money where it is, i.e. in well stuffed bank accounts, and an existential threat is important enough to make it politically feasible.
And if you think really. The poor who live from hand-to-mouth, do they really care about inflation as long as wages keep going up with it. It is not like they even aim to save anything. So prices going up if also their wages do have really net zero effect for them.
With a steady inflation, the lag does not matter. The current problem is that wages are not following, although inflation had been fairly consistent for a couple of decades (until SARS-CoV 2). Historically, this seems to be an anomaly.
I think the gullible take is to imagine that the wealthy and powerful maximize their gains in an unstable system. They don't care about stupid people, but they care about the instability that comes with people getting taken in by scams or bad deals.
People who are currently at the top of a power structure have an interest in stability. One way of doing that is allowing people further down the power structure to profit in a limited way from the system. This both won't change anyone's relative position, and is a genuine improvement for all parties.
My other critique of "rules are about protecting the rich" is that the counter-factual of no rules does hurt the rich, but it hurts everyone else as well. It just doesn't seem true that striking down rules against manipulating markets is helpful to the non-rich, so it feels like cutting off your nose to spite your face.
It's really great that people who don't have tens of millions of dollars to burn can't access L2 market data. It does a lot to promote fair and efficient markets.
It's a fundamental question wether people should be allowed to take on risks or not.
If you are leaning towards the "no they should not" side, then consider that doing a startup is also very risky. So maybe that should be illegal, too? Or at least, there should be government startup specialists that evaluate ideas and decide wether people should be allowed to create such startups?
Or should there be an elite of people who would be allowed to create startups, and the poor people (can't afford the risk) should be restricted to union jobs?
That is not a fundamental question. Everybody agrees that people should be generally allowed to take risks. However, we also constrain those risks in all sorts of ways so that we can run a reasonably safe and effective society. The eternal questions are which risks lead to generally positive-sum activity and which tend to be dangerously opaque, negative-sum, or with strong negative externalities. You can see this is almost any serious activity. Not just investment. Think of food, or transport, or construction.
thats like, your opinion bro. In all seriousness I am ok with crypto punishing gamblers, eventually people will learn to stay away from it, or be forced to stay away from it because they have nothing left to gamble. I don't see how this is more morally repugnant than casinos which are legally accessible in most of the US.
It's more morally repugnant because it's much less transparent. Casinos are exploitative misery factories and I'd be happy to see them vanish forever. But they're at least carefully regulated to exploit people at an agreed-upon level and with all the rules known beforehand.
If I play slot machines I know I lose money. But at least I know the return isn't absolutely horrible. Usually around 90%... Same applies to many casino games if played sensibly.
The lotteries and scratch tickets are the truly horrible crap. Return is absolutely abysmal with them...
Personally I am ok with both crypto and Casinos existing, just because some people are stupid doesn't mean i should have my freedoms restricted. Stupid Should Hurt.
As an aside crypto has the potential to change the world for the better if it ever becomes used as a real currency. I think the people that stand to lose in that situation love spreading FUD about crypto. However it is probably not bitcoin that is going to become that imho, but rather some POS coin.
It's bad for society to let scam artists operate unfettered. It doesn't just harm the scammed. For one, you've given terrible people more money to run bigger scams. Two, it misdirects resources to negative-sum activity. Third and most broadly, it reduces trust in anything that looks vaguely similar, which increases transactional friction and reduces available investment capital, making society poorer as a whole.
And that's before we even get to your illusion that you are safe from being scammed because only stupid people get suckered and you're one of the smart ones. There are scams for everybody. The whole "crypto" space is proof of that.
> I don't see how this is more morally repugnant than casinos which are legally accessible in most of the US.
Gambling is heavily regulated in most of the US. It can be morally repugnant because retail investors are being swindled into making terrible "investments". Retail investors really shouldn't be exposed to that kind of manipulation and risk.
You can argue that they're stupid and deserve it, but some of these people have kids to feed and house, and when their house of cards comes falling down, innocent people will suffer.
This seems sarcastic but the amount of resources that has went into building all casinos, casino sites, and everything related to the industry dwarfs the amount of resources that have went into bitcoin by a lot.
If it seems otherwise it might be because you see articles on Bitcoin's energy consumption all the time, and not as much about casinos.
I look forward to seeing your math on that. But for a fair comparison you can't just look at "casinos to date" and "Bitcoin to date". After all, as Bitcoin proponents never tire of telling us, this is supposedly the early days.
Some of the most expensive casinos (just the building) to build are:
Venetian Macau – $2.4 billion, Wynn Las Vegas – $2.7 billion, Resorts World Sentosa – $4.53 billion, Marina Bay Sands – $5.36 billion, CityCenter Las Vegas – $9 billion.
That already likely costs more than the combined electricity used by Bitcoin so far, if it doesn't you can easily reach trillions by combining the costs of just Casino buildings. Money roughly translates into resources, so I can't see a way in which the gambling industry hasn't consumed much more than Bitcoin as of right now. Maybe in a century if Bitcoin keeps going really strong it can start to catch up.
> you can easily reach trillions by combining the costs of just Casino buildings.
I have my doubts about this.
BTC energy cost was in the realm of 10 billion/year this year, and increasing quickly year over year. That's from around 150 TW hours, or around 5x Nevada's consumption.
The hash rate this year averaged around 140 million THash/sec. It appears that efficient equipment costs about 10k per 100THash/sec. So you're looking at another 14 billion in currently running hardware, conservatively, not to mention the price of the buildings those Asics need to be put in.
There's another big flaw here, which is that cost isn't just reflective of consumption but of demand. The same hotel building on the Vegas strip is a lot more expensive than if you built it in rural Idaho, and BTC has the advantage of being able to use the cheapest land and electricity.
In the case of buildings, that money went largely to engineers, workers, and materials. It’s not the best way of stimulating local economies (it’s fairly inefficient because of bribes and margins), but still much better than Bitcoin.
Casinos are deemed acceptable and gamblers are (somewhat) protected instead. Instead of avoiding the bad situation, it makes it less bad. It’s just a different risk management strategy; prohibition would not be ideal either.
I think jayd16's point is that everybody knows that casinos are negative sum and have for a long time. But still, they continue to exist. So we can't assume, as ravar does, that in the long run the market will eliminate negative-sum things.
Companies are free to direct list without underwriters and even issue new shares in the process.
I'm not sure what a "pop" (the idea that prices often go up on listing) has to do with anything. It generally means that the company underpriced its equity but by no means does this always happen.
Are you referring to a greenshoe? There's some misinformation there too, but it serves a purpose, too. [1]
I think they may be referring to the "pop" some tech companies have gotten lately where they may have been purposely undervalued so when they IPO they get a nice 5-10% "boost" and good publicity when they open.
IPO "pop" is a bit of pejorative usually referring to the deliberate underpricing of an IPO so that the investment bankers' big clients can get a quick profit, the difference between the IPO price and the first available exchange price. In the context of this thread, an example of Wall Street sleaze.
When half of the people responsible for regulating markets are, instead, using insider knowledge to make a killing at day-trading, it's hard to trust the system.
So, the natural response is to build a new system that can be made to dance on strings by people you don't even know the identities of.
Ironically a lot of people that would have before criticized Wall Street now seem to be spending more effort criticizing cryptocurrencies ? (Even though they are the same kind of people that created and popularized cryptocurrencies to deal with Wall Street's issues in the first place ?)
Indeed, one good criticism of cryptocurrencies is that the are sucking up a lot of the attention and money that could go into actual reform.
For example, contrast Bitcoin usage in emerging markets with something like M-Pesa. They both started at the same time, but M-Pesa has been a huge boon to the unbanked, whereas Bitcoin is a rounding error in those markets.
Still remember going to a crypto meetup and met an older guy who worked at Arthur Andersen (auditor of Enron). Told me "you know what those Oak Doors stand for right? Your financial secrets never leave the firm."
