Post
Topic
Board Economics
Re: Question from a Bachelor in Econ
by
bitinlet
on 25/02/2014, 19:00:31 UTC


I don't care what letters are next to your name,...

I didn't bring up letters next to my name. You did. Look at the title of this thread. Then, when you're done, look at how you unwisely questioned my education in a patronizing fashion.

but if you have as much education in economics as you suggest, then your argument is extremely odd to me.

Why? It's basic trade theory. Literally, econ 101.

The fact is that if all the currencies are moving up and down in value together as you suggest,...

I'm not saying all currencies are moving up and down in value together. If that was the case, exchange rates from a domestic currency to foreign currency would never fluctuate. Of course, they move in varied directions. My general point was changes to the supply of the domestic currency impacts exchange rates with other currencies (including Bitcoin).
thus causing the volatility in BitCoin,...

I was careful with how I chose my words. I said that a "non-trivial amount of volatility" with Bitcoin could be due to changes with the domestic currency (such as QE). Which is objectively true because it's an exchange rate.
...then commodities should move up and down in value relative to these currencies together.

No, once again (I already said this and you didn't respond to it), Bitcoin and commodities such as gold could be thought of as substitutes, not complements. Therefore, gold prices (in USD) could go up, while Bitcoin (in USD) prices go down. And... that... is with holding all other factors (not in question) constant.

They may move in different proportions, but they should move generally in the same direction at the same time.

Says who? Re-read the part on substitutes.

Furthermore, it seems odd that if it is the currencies that are so volatile and not BitCoin that prices in countries like the US are relatively stable compared to the price of BitCoin relative to strong currencies.

Just to clarify, again, I never said that Bitcoin in and of itself (it's demand, for example) is not volatile. Of course it is. I believe demand for Bitcoin is volatile because it's a burgeoning currency and there's risk involved. The supply is fixed. Yet, my point was that many forget the Bitcoin side of the equation (Bitcoin demand and supply) is not the ONLY reason for it's volatility. To provide an example, let's use Bitcoin priced in USD. If the Fed decides to stop QE in totality, this would have an effect on the price of Bitcoin... yet, holding all else constant, the mechanism would actually be through the Supply of USD, not Bitcoin itself. This is often forgotten, which is why I originally raised the point.

It seems strange to me that someone with a degree in mainstream economics would suggest otherwise, so you will forgive me if I doubt your credentials. If there is something I am truly not getting in your argument that links it to mainstream economic theory, please enlighten me.

My points are all 100% accurate. And they were presented as straight-forward as possible. Supply and demand for money in country A can effect the exchange rate with country B (or in this case Bitcoin). That's fact. Seriously, go ahead and look it up...