Quote from: tee-rex on July 23, 2014, 10:52:30 AM

Quote from: Erdogan on July 23, 2014, 10:39:21 AM

Quote from: tee-rex on July 23, 2014, 07:07:34 AM

Quote from: Erdogan on July 22, 2014, 11:32:00 PM

Quote from: tee-rex on July 22, 2014, 05:26:48 PM

Quote from: Erdogan on July 20, 2014, 12:05:41 PM

Housing bubbles exist because of the one bad property of current money: storage of value. Since current money is not good for that, houses are used. And since they are bought partly for the storage of value function, they acquire exchange value. But since the supply is not fixed, and the demand to hold can change as people move, the exchange value can be lost, and in case of over-supply in an area, their value can go below value for direct use.

So houses are money, but bad money. Bitcoin could solve that problem, making houses generally go down to their value for direct use.

The same plague would chase Bitcoin as well (actually, even stronger since Bitcoin has no "direct use value" at all). Bitcoin could indeed substitute houses as a store of value (at least to a degree), but it would inherit the same faults (that is "bubbleness", in the first place).

Plague? See my theory of money as bubbles. Since bitcoin has no use value, it is perfect for this. In fact adam smith considered that if something different from gold was money, that would be a problem, because it would distort the use value of the stuff being money. For instance, he said, if rice was money, the saving of rice would necessarily lead to hunger for some. What we have, is houses are money, and we have exactly the problems that adam smith envisioned: houses (in london and new york) are hoarded, and noone lives in them, to the detriment of people needing houses. That is the problem. Money like bitcoin (and fiat) with no value for direct use, is perfect exactly because they have no use value. Fiat is good for every money function, except the store of value, therefore bitcoin will solve the problem with houses as money, and release the resources now unneccesarily bound in houses.

Plague here means continual trouble which you can't get rid of. You say that houses take on a store of value function of money since "current money is not good for that", but this leads to housing bubbles, correct? So if Bitcoin is good as a store of value, this will also bring about now Bitcoin bubbles.

Besides that, being a good store of value doesn't make a good means of exchange, and vice versa.

The store of value function leads to bubbles for houses when houses are used for money.

Bitcoin can be considered a bubble for the same reason. The exchange value part of the good is the bubbly part. The bitcoin bubble may never deflate because it is the best money.

Bitcoin solves the problem with housing bubbles. There is never a tooth-paste bubble - because nobody uses toothpaste as a store of value.

I wouldn't say that Bitcoin will solve the problem with housing bubbles, just because there is no direct use value behind it. The house prices can't fall down and reach null for evident reasons (people need homes to live in). Though this doesn't in the least mean that some decrepit houses in dangerous places would be worth anything.

Also, I'm not sure about a tooth-paste bubble, but there had already been a tulips mania (you know what I mean). Wink

Look, if houses fall down to the use value like you describe, and stay there forever, the house bubble problem is solved.