Money As A Generally-accepted Medium For Short Selling

Hmm, this is interesting. It is similar to the answer I gave Alex Millar over in the Forum, I think. I'll rearrange it a bit to suit my brain. According to you, in a nutshell, money is the preferred medium for shorting because inflation is stable. Firstly, you have just implicitly acknowledged a causal relationship between the price of consumer goods and the price of labour. A further implication of your setup, one I'm less convinced of, is that the fact that money and labour tend to have a fairly stable relationship is somehow coincidental, or a function of modern central banking. The best media for this purpose—those most capable of providing a predictable price—will become society's generally-accepted media for shorting. So first (hypothetically speaking) there are lots of media around, some of which are more stable in relation to hours worked and other less so. The best will tend to become society's generally accepted media for shorting (and all other functions associated with money, I suppose,).

When a spike in the public's demand for money occurs (otherwise known as a bank run), private banks will try to accommodate that spike until they can't, at which point they can turn to the central bank for help. The central bank can in turn manufacture whatever quantity of new money is necessary to meet that demand. So short squeezes will always be prevented by the central bank. That's a feature that neither Netflix nor bitcoin can offer. What about times before modern central banks came along, Was money then not a generally accepted media for shorting, Did occasional short squeezes, say in specie, prevent people from promising future labour output, And why would one medium be more stable in relation to labour output than another without the magical features of central banking, Why weren't they all like bitcoin, My answer to the last question would be that money actually IS the product of short selling labour (please correct my use of the term short selling if it's muddled, I'm not in finance). The medium called money only exists as such because it captures the promises by its users (debtors) to deliver labour output in future. It is not a feature of money, it is the cause of the value of money in the first place. And that cause, being forward oriented, is self-perpetuating and sticky by definition. The value of labour isn't sticky in ralation to money. Rather, money is today's labour output which tends to be rather sticky in terms of labour's output tomorrow.

Every day, more and more consumers and merchants are buying, using and selling Bitcoin, all around the world. The overall numbers are still small, but they are growing quickly. And ease of use for all participants is rapidly increasing as Bitcoin tools and technologies are improved. Remember, it used to be technically challenging to even get on the Internet. The criticism that merchants will not accept Bitcoin because of its volatility is also incorrect. Bitcoin can be used entirely as a payment system; merchants do not need to hold any Bitcoin currency or be exposed to Bitcoin volatility at any time. Any consumer or merchant can trade in and out of Bitcoin and other currencies any time they want. Why would any merchant - online or in the real world - want to accept Bitcoin as payment, given the currently small number of consumers who want to pay with it,

“Let’s say you sell electronics online. Profit margins in those businesses are usually under 5 percent, which means conventional 2.5 percent payment fees consume half the margin. That’s money that could be reinvested in the business, passed back to consumers or taxed by the government. Of all of those choices, handing 2.5 percent to banks to move bits around the Internet is the worst possible choice. Another challenge merchants have with payments is accepting international payments. In addition, merchants are highly attracted to Bitcoin because it eliminates the risk of credit card fraud. This is the form of fraud that motivates so many criminals to put so much work into stealing personal customer information and credit card numbers. Credit card fraud is such a big deal for merchants, credit card processors and banks that online fraud detection systems are hair-trigger wired to stop transactions that look even slightly suspicious, whether or not they are actually fraudulent. As a result, many online merchants are forced to turn away 5 to 10 percent of incoming orders that they could take without fear if the customers were paying with Bitcoin, where such fraud would not be possible.

Since these are orders that were coming in already, they are inherently the highest margin orders a merchant can get, and so being able to take them will drastically increase many merchants’ profit margins. Bitcoin’s anti fraud properties even extend into the physical world of retail stores and shoppers. For example, with Bitcoin, the huge hack that recently stole 70 million consumers’ credit card information from the Target department store chain would not have been possible. You fill your cart and go to the checkout station like you do now. But instead of handing over your credit card to pay, you pull out your smartphone and take a snapshot of a QR code displayed by the cash register. The QR code contains all the information required for you to send Bitcoin to Target, including the amount. You click “Confirm” on your phone and the transaction is done (including converting dollars from your account into Bitcoin, if you did not own any Bitcoin). Finally, I’d like to address the claim made by some critics that Bitcoin is a haven for bad behavior, for criminals and terrorists to transfer money anonymously with impunity.