Quote from: aminorex on April 02, 2014, 02:13:49 PM

Quote from: AnonyMint on April 02, 2014, 11:17:04 AM

Please cite a reference which says as demand (bids) increases, the float decreases?

1. 1000 waiwai on offer.
2. 1 waiwai bid
3. 999 waiwai on offer

This is a decrease in the float. Until and unless my waiwai is offered, presumed infinite wampum are chasing fewer waiwai.

The static Wall of bid/ask is not the float. The float is everyone who is in the market to buy and sell at some price. Their bid/ask don't need to be registered on an exchange. They come onto the exchange when the price moves to their target price range.

http://www.investopedia.com/terms/f/float.asp

"Float may also refer to the total number of shares available for trading. Float is calculated by subtracting closely-held shares from the total number of outstanding shares."

The 1 bid taken, adds another ask to the float (at some price).

Quote from: aminorex on April 02, 2014, 02:13:49 PM

Quote

The supply increases faster than the demand because investors have larger and larger gains, this is why marginal price doesn't grow to the edge of the universe. The same is true in production, where the price won't go to infinity because new producers will come online to serve higher demand at higher marginal prices.

The difference is that there can only ever be 1000 waiwai.

If you are referring to the entire Bitcoin money supply, the 1 bid taken, adds another ask to the float (at some price). The float didn't decrease.

Quote from: aminorex on April 02, 2014, 02:13:49 PM

Quote

Quote

Increasing V decreases M.

Or it increases P x Q.

Yes. Allow me to reveal a secret about the Klein bottle market: Alice has been selling Klein bottles at a constant rate to her neighbors since college, in exchange for wampum. Q is fixed. Consequently, Alice adjusts P to hold demand.

The supply of potential Bitcoin merchants isn't fixed. Marginal price will find equilibrium. Alice doesn't have a monopoly here.

Errata: Sorry Bill Gates. This is open source so there isn't even a monopoly on crypto-currencies coin supply.

Quote from: aminorex on April 02, 2014, 02:13:49 PM

Quote

Quote

Increasing the number of times a waiwai can flip during a fortnight, say by using African swallows instead of pidgeons, will increase laden air speed, thus decreasing the wampum per waiwai.

You got that backwards.

I certainly hope to discover if I got it backwards. Polarity errors are explosively disastrous.

I'm impressed that you so recognize.

Quote from: aminorex on April 02, 2014, 02:13:49 PM

Quote

Increasing the V that doesn't need to convert to/from fiat doesn't necessarily decrease the fiat price of BTC. It may decrease the supply of BTC that wants to sell for fiat, while increasing the demand for BTC of those who hold fiat, because there are more network effects within the Bitcoin ecosystem that they want to avail of.

Here you make a unit error, or else a lexical substitution error, or perhaps a simple omission of steps - the surface form is ambiguous. Presumably you have a case, but it hasn't been transmitted. V can't convert to/from fiat. That's the apparent unit error. If it is a lexical error, this is the reading:

Quote

Increasing the waiwai that doesn't need to convert wampum doesn't necessarily decrease the wampum price of wawai. It may decrease the supply of waiwai that wants to sell for wampum, while increasing the demand for waiwai of those who hold wampum, because there are more network effects within the waiwai market that they want to avail of.

This reading makes perfect sense.

But that reasoning is not applicable to fixed stock of waiwai, consistent with the pattern of my earlier comment regarding the "difference".

Otherwise valid economic reasoning which is conditioned on elastic supply and demand premises might mislead one, if applied to an inelastic supply or demand situation. In the waiwai case, the supply is fixed forever because the bird from which they were taken went extinct when the last waiwai was plucked. For that reason, we tend to subdivide our waiwai, and weigh them out, although it can create dust in our wallets.

V represents all the network activity (and thus value via Metcalf's Law) of exchanging BTC <-> goods+services <-> BTC.

As V increases, value of BTC increases. Since fiat is not increasing as V increases, then the value of BTC relative to fiat increases.

If we instead allow V to include exchanges to/from fiat to attain those goods+services, then value of that network activity is imparted to fiat (because the holder of fiat doesn't need to convert to BTC to avail of those goods+services). This is very clear because as the number of goods+services that are only available in exchange for BTC increases, then the demand for converting fiat to BTC to avail of them also increases.

There was no unit error because V is a collection of activity of BTC demand for goods+services, rather the unit was plural.

Quote from: aminorex on April 02, 2014, 02:13:49 PM

Quote

Quote from: aminorex on April 02, 2014, 05:02:36 AM

Using bitpay keeps BTC in the air.

That is irrelevant as I have explained.

I understand that you may think I am being astoundingly obtuse. You have a valid and subtle point which could be reasonably expected to be overlooked or simply not understood. I am looking straight at it, in fact. I understand its validity. I will re-read, and check that I am not misinterpreting your case, after work, but so far all I am seeing is that you are mislead by applying elastic supply reasoning to an inelastic supply dynamic, and attributing to network effects what is adequately and clearly explained by stocks and flows. If you explained a defect in my reasoning, I missed that explanation.

My illustration is intended to clarify. If the reasoning applies to BTC, it should apply to the waiwai case, which abstracts over irrelevancies. Unless an un-representable complicating factor can be shown to be relevant, or the analogy fails by irremediable non-isomorphism, restricting vocabulary to waiwai world will work wonders.

Network effects (connections between nodes inside of BTC without converting to fiat) is precisely what gives value to Bitcoin.

Connections to fiat extract value.

This was something I learnt many years ago and it is why all the other currencies are slave to the dollar reserve. It is why the US Treasury official famously said to the Third World central banker, "it is our dollar, but it is your problem".

You must learn this. It is fundamental.

Quote from: aminorex on April 02, 2014, 02:13:49 PM

Quote

Sorry you really dropped the logic on this one.

I'm hoping you won't lose patience with me before the issue is clarified in a manner which resolves any discrepancy. It seems so basic, so fundamental, so elementary, that I would be functionally insane, economically, if such an error in my reasoning were persistent.

I agree. I know you are very smart. You will either point out to me my error or realize yours.

Quote from: aminorex on April 02, 2014, 02:13:49 PM

Increasing velocity effectively makes a given number of waiwai do more work, a kind of oversupply. I could see how this view could lead to your objections - after all, if one waiwai can be reused many times, doesn't that mean there are plenty of waiwai? I think it would be very mistaken to reason in this way. For a fixed PQ, V represents the resulting demand for waiwai. When the supply of waiwai is fixed, inelastic, V fulfills the need for elasticity. It becomes higher because the demand for waiwai is so high. Unless buyers are willing to ship wampum by canoe, Alice's cousins will not be able to sell their Klein bottles if there aren't enough waiwai (or pidgeons, but they reproduce). Each waiwai has to flip 10 times in order to move 140,000 Klein bottles per fortnight. Or else, if V is fixed, then a Klein bottle will sell for 1/10 of a waiwai.

BTC circulating without conversions to fiat leads to increase of M x V, which forces P x Q to increase. This P x Q are the goods+services priced in BTC. This is precisely what gives rise to value in Metcalf's Law. These circulations are the connections between nodes in Reed's Law.