Quote from: deisik on April 20, 2017, 07:22:38 AM

Quote from: lazyturtle on April 19, 2017, 08:38:22 PM

Quote from: deisik on April 19, 2017, 06:45:25 PM

Quote from: lazyturtle on April 19, 2017, 05:06:00 PM

Quote from: deisik on April 19, 2017, 02:39:28 PM

Quote from: lazyturtle on April 19, 2017, 01:31:24 PM

Quote from: deisik on April 19, 2017, 01:08:52 PM

Right now it is (for the most part, at least)

Bitcoin and other cryptocurrencies fit well into the definition of a financial bubble. I could even claim that Bitcoin is a sort of tulipomania. Just like tulips, bitcoins are useful for some purpose, namely, for transferring value around the world while completely bypassing centralized (real controlled) entities like banks, but Bitcoin current price is by no means determined by this utility. Most of Bitcoin value today comes from sheer speculation. Whether Bitcoin bubble is going to pop eventually or its real use as a currency will finally match its use as a speculative vehicle is not clear as of yet

Good answer, always fun to hear others opinion. =)
I agree with you, bitcoin does fit well in the definition of a bubble as it is completly speculative. But what about fiat money? We have seen again and again trough history how fiat money has just blew up in a bubble, happend with the german mark after world war 2 and then the zimbabwean dollar. Does this not show that fiat moneys value also comes trough speculation? the only diffrence being that it can much more easily be controlled, manipulated and abused to hurt individuals, while cryptocurrencies also are speculative in there value, it does have the security fiat-money does not against corruption and protecting the individual

I think that no, the fiat money value doesn't come about via speculation

But I'm still curious how you can even imagine that. It is more or less clear how people speculate with bitcoins (basically, "buy low, sell high"). It is possible as long as Bitcoin price is rising, i.e. new users constantly bringing their hard-earned dollars, euro, or whatever to the market and buy bitcoins in the hope of selling them at a higher price. I suspect there cannot be bubbles of that kind with fiat currencies. The examples you give refer to severe currency devaluations. Obviously, the latter have nothing to do with speculative bubbles, though the end result is essentially the same (i.e. dramatic loss of value)

Well you are assuming two things here and i will try to give you my opinion. Let me try and explain why i can imagine fiat money being a speculative bubble, english is second language so give me a break on the spelling. =)

Your first assumption that fiat money value is not a result of market speculation, could you elaborate what you believe are the true factors for a currencies value? You seem like you now your economics and i am always eager to hear everyone opinion

Sorry, I didn't read the rest of your post

And I hope that someone did that (instead of me) so your efforts haven't been spent in vain (though I may still read it later). Regarding this question, specifically, I already answered it before, and I think that the answer can be reduced to how value of a currency is determined as such. In fact, it is determined arbitrarily when the currency is first bootstrapped. To make it handy and usable, its basic units as well as the number of these units in total are chosen in such a way that the lowest possible denomination (say, halfpenny or cent) would be enough to buy an item which has the lowest possible value. A box of matches is often used as such an item. After bootstrapping the currency, the long term value of its unit (i.e. how much you can buy with, say, 1 dollar) basically depends on the relationship between total amount of that currency in circulation and the quantity of goods produced as well as the amount of services provided

Well it's to bad you didn't read it you could have learned someting, it isnt that long

like Germany and Zimbawe never had a devaluation, but hyperinflation, kind of important fact you got wrong and you can always learn something!

As I know it, currencies in these countries were deliberately devalued by excessive printing of money that led to hyperinflation. I'm not much interested in what happened in Zimbabwe (I mean specific details, but it looks like they had incompetent and corrupt government). Germany was obliged to pay out heavy reparations after it had lost in WWI, which it simply couldn't physically pay out (and which it didn't pay out in the end), so hyperinflation caused by massive devaluations of the German mark was an expected outcome. You may want to read The Economic Consequences of the Peace (1919) by John Keynes where Keynes predicts the economic chaos in Germany which was going to follow the Versailles peace treaty of 1919

Quote from: lazyturtle on April 19, 2017, 08:38:22 PM

Could you please give me your sources that show that goods and money circulation have been the deciding factor for currency value?

Basically all monetary theories claim that

They agree in general that the increases in the quantity of money lead to higher prices. But you may look specifically into the quantity theory of money (so-called the Chicago school of economics also known as monetarism) which uses the Irving Fischer Model. Apart from that, it directly follows from the concept of money, i.e. the input of excessive amount of money into the system will cause the prices to rebalance at a new, higher level. Competing theories (e.g. monetarism vs keynesianism) differ in how the new money propagates through the economy and in what degree it affects the economic activity and unemployment (see the so-called "Treasury view" to get an idea)

Thank you for your response. Some of the sources i already knew off, but i actually can't remember reading about the quantity theory of money (shame on me). So thanks for that one, and thanks for giving serious responses, i really feel like i am learning something from you.

But do you think after a few discussions that you atleast understand me more in my view of fiat money as containing elements of speculation? Even if you don't agree it would be fun if i atleast made it possible for you to see my point of view.

Do you think that the quantity theory of money can be used to practically predict changes in the currency market, or do you just see the theory as a general means of explaining what should move currencies?