Since the hashes depend on the entire previous block chain containing all previous transactions, you cannot simply pre-compute hashes in private to prepare for one giant dumping on hashes into the network.

It is possible to corrupt the network, you have to be able to produce more hashes than everybody else together, i.e. you have to own >50% of the computing power in the network. So you need more than a decent size cluster; you actually need more than the sum of all the decent sized clusters that are already out there.

Some historical perspective: around 1900, people bemoaned demographic change in Germany. People were starting to get older, and who would pay for all the old people? They used the exact same language and arguments that are en vogue again today. But the reality is that throughout the 20th century, retirement systems worked just fine. In fact, the situation improved instead of getting worse. That's just for perspective.

Now here's the thing: it's not about the money, and it's not about the demographics. It's about productivity. In those days, the number of workers per retiree was in the double digits. Today it's an order of magnitude lower. The world didn't end, because our productivity increased. Technology helped, and it will help in the future.

Ask yourself this: can the real goods and services that society wants to supply its retirees with be provided? Given the high rate of unemployment throughout the Western world, the answer for the US and Europe seems to be a very clear Yes. If only our politicians were to use money and the financial system to solve problems instead of creating them, there would be no Social Security problem at all.

You do realize that a bank robbery can never actually steal your money, right? A bank robbery is about stealing bank notes that are owned by the bank. If you give a couple of bank notes to a teller at the bank to add them to your account, and five minutes later they are stolen in a bank robbery, nobody actually stole your money at any point.

Unless you store bank notes in a safety deposit box at the bank, in which case I am not so sure they owe you anything in case it gets stolen.

Kind of off-topic, but this is a common misunderstanding. The most direct causal link between inflation and printing money is that when inflation happens, you are eventually forced to print more money so that payment settlement can continue normally. [1] The misunderstanding comes from people confusing printing money with government spending.

There are a number of causes of inflation, but for this type of discussion, the relationship of productive capacity and aggregate demand is key. The short version is the following. When aggregate demand grows too fast for productive capacity to keep up, then you get inflation (because competition drives up prices). When productive capacity grows faster than aggregate demand, then unemployment results (because companies that cannot fill their order books lay off workers). Those are the key constraints of the economy.

From a sovereign government's point of view, this means that while it can obviously spend as much as it likes, there are real constraints to keep in mind. If the discretionary budget deficit is too large, there will be inflation. If the discretionary budget deficit is too small, there will be unemployment. (Of course, due to automatic stabilisers, the final budget outcome can be very large and unemployment can be high at the same time. In such a situation, the reasonable thing to do is to increase the size of the discretionary budget deficit. This often decreases the final budget outcome via automatic stabilisers.)

One cannot say a priori how large the budget deficit should be to be neutral with respect to both inflation and unemployment. The size of the neutral budget deficit changes over time, based on changing circumstances in the private sector's savings behaviour and the development of the external sector.

Fundamentally though, printing money is just a liquidity management operation. What really matters are spending flows.

If you truly have an open mind and want to learn more about the long version, I suggest you search for Modern Monetary Theory. A good starting point is here, and more thorough analyses can be found on this blog of an Australian economics professor.

[1] The recent story of Argentina in that respect is very educational. Basically, Argentina has long had quite high inflation, and the government believed - like most people do, unfortunately, due to that misunderstanding - that they could fight inflation by not printing any more money. Well, prices were rising anyway, and at some point there was a lack of physical money for people to make their payments. Keep in mind that electronic payments are not well developed in Argentina, so people might have had money in a bank account, but were unable to get it out simply because the ATMs ran out of notes. This was not in any way a bank run, it was just an under-supply of tokens, and the irrationality that goes along with that kind of problems hurt price stability on top of the inflation that was happening anyway. In the end, printing more money solved that problem, but crucially, it was really only about printing more money, purely liquidity management. By printing this money, the government did not increase its spending.

Be careful to get the causalities right. It is not the budget deficit and the issuing of treasuries that drives up interest rates. Interest rates are set by monetary policy, which is decided by the central bank. And as I said, I would be all for a zero interest rate target (which would mean zero interest paid by the central bank and government, and a very low cost of borrowing at the central bank).

There is no risk of default for the federal government, by definition. If the Tea Party lunatics get their way, it might default voluntarily. But the federal government cannot, ever, find itself in a position where it is unable to pay.

(Though to clarify, from an economics point of view, "government" means all of government, not just the executive branch. If the legislative branch decides that the government should go into voluntary default, then there's not much the executive branch can do against that under current political arrangements. The important point is to understand that the government can never be unable to settle its bills, it might just become unwilling to do so for stupid ideological reasons.)

You're mixing up too many things for me to bother to reply in detail. The short answer is that since the part of inflation that can be controlled domestically is essentially driven by the relationship between aggregate demand and productive capacity of the economy, it is perfectly feasible to run a zero interest rate regime and control inflation by setting the size of the budget deficit appropriately. This is what Japan has been doing for two decades now. If you honestly want to understand more, I again recommend reading about Modern Monetary Theory, start with e.g. Warren Mosler's 7 Deadly Innocent Frauds, or perhaps Bill Mitchell's blog.

Do you believe that the budget outcome is chosen by politicians? If so, I have bad news for you: it is largely a result of automatic stabilisers. If the economy were to grow again significantly, then the budget deficit would reduce automatically via increased tax revenue and reduced welfare outlays. The budget deficit as a ratio of GDP would fall below the growth rate long before the growth rate reaches those 10%.

What you wrote here is exactly the starting point of Keynesian arguments. After all, people and businesses aren't stupid. Businesses are going to invest only when they see income opportunities. Income comes from somebody else's spending, and at a macroeconomic level, there are three sources of spending: private (consumption and investment), government, and the external sector.

Consumption is hurt because the private debt excesses of the last decade have come to a full stop, investment won't start itself, and the external sector is very slow to adjust. That leaves the government as the only possible source of spending to restore business income and therefore business confidence.

The problem is that - out of fear of being attacked by austerity ideologues - the government has severely underestimated the scale of the problem, and therefore their stimulus measures have been far too small. Not to mention that a lot of the measures were really about tax cuts, which are not a good way to induce spending in a balance sheet recession: in such a situation, those tax cuts are used to pay back debts, so the additional spending effect is too small.

Not really. If the Federal Funds rate were set at zero (or 0.25% for borrowing from the Fed), but lending is restricted by capital constraints, then it would actually - perhaps for the first time in a century - cause interest rates to be set by supply of capital vs. demand for loans.

Well. The current mess we're in is essentially the markets' "quick response" to excessive lending. Markets do respond, but to believe that they always respond in a manner that is best for the country is a bit naive.

I totally agree. This is not in any way specific to using capital requirements to control lending. The same considerations apply to current monetary policy, i.e. changing the central bank's interest rate target.

Aren't you contradicting yourself here? If economies aren't delicate, then why do you write above that so much care must be taken?

Besides, I totally disagree. Look at Great Britain. They made large budget cuts, and yes, it broke things.

Sometimes it is indeed hard to see the forest for the trees.

Does Blizzard need to balance the amount of gold they put into World of Warcraft vs. the amount of gold that is taken back out by some means? No? And neither does the federal government, because they are in a totally analogous situation with respect to their respective monetary systems.

Again, I encourage you to read about Modern Monetary Theory. In a nutshell, the point is that when the budget deficit is too large, you get inflation, and when it is too small, you get mass unemployment. But where the "right size" of the budget deficit lies depends on the savings behaviour of the private sector, and the empirical evidence clearly indicates that the "right size" budget is typically in a moderate deficit. Occasionally, the "right size" budget may be in a significantly larger deficit, and occasionally it may be a surplus. But a zero, balanced budget is only rarely a good idea.

Exactly! The amazing thing here is that while people generally (with the usual fringe exceptions) understand why the government having the monopoly on force is a good thing (due process as opposed to lynch justice, etc.), there is much less understanding about why the government having the monopoly on the economy/money is also a good thing.

Like all power, it can be abused, and then some checks and balances need to be put in place. Those work best when people understand how the system works, which is why I bother with participating in such discussions.

Yes, there are types of wealth that are not of a financial nature, such as physical assets. What you say applies to them, true. That doesn't give you a free pass to ignore the relationship between financial assets and government debt.

Obviously there are different interest rates, yes. The point is that those other interest rates end up being relative to the rate set by the central bank. When the central bank raises their target, banks usually follow up by raising their own interest rates so that they can still make a profit. This interaction between the interest rates is the whole point of monetary policy.
(I snipped out the last part because you're just re-iterating without justification what follows below anyway)

Your original point was something like this: government borrowing reduces the amount of money available for other borrowers, this raises interest rates for other borrowers. How things are distributed does not affect the aggregate quantities, so of course I ignored the distribution. The distribution is irrelevant to your original argument, so bringing it up now is kind of disingenuous.

Let me accept your flawed premise for a moment [1]. Let us compare two scenarios: (a) the government runs a budget deficit of size B and issues treasuries to match it. (b) the government runs a balanced budget and does not issue treasuries.

In your model, under scenario (b) there is X amount of funds [2] to go around to be borrowed by private borrowers. In addition, there is some request for Y amount of loans by private borrowers. Those things are matched somehow.

Under scenario (a) there is X + B amount of funds to go around to be borrowed, because the government's budget deficit adds to the amount of money that is around. In addition, there is some request for Y amount of loans by private borrowers, and the government attempting to issue B amount of treasuries.

Let us compare the intensity of the "competition", shall we? One measure could be the amount of funds available per desired loan, which is X/Y in scenario (b) and (X+B)/(Y+B) under scenario (a). I encourage you to do the math: if there is "competition" for loans in the first place (i.e. X/Y less than 1, so that there is no "surplus of funds"), then the addition of the government's budget deficit actually reduces the intensity of the competition, because (X+B)/(Y+B) is closer to 1 than X/Y.

[1] I am assuming here that the classical model of a market for loanable funds underlies your thinking, where people with savings go to loan them out for a profit, and borrowers go to request funds. This model is pretty flawed, because the way in which banks give out loans is not compatible with it. So I reject your premise - your model of how the world works - but more importantly, even if I were to accept your premise, your conclusions based on it would still be wrong.

[2] Of course you will say that there is actually some kind of demand and supply curve depending on the interest rate. You're welcome to figure out the math in that somewhat more complicated model for yourself. I promise you your results won't be qualitatively different.

Yes, nice numbers, but what do they mean?

You mentioned only one actual effect of those numbers, namely interest payments. Those constitute a risk-free stream of income for holders of treasuries. Is that a bad thing? That's a matter of political opinion. To my mind, this actually is somewhat problematic, because it tends to essentially be welfare for the rich.

The good news is that interest payments are entirely voluntary, and the interest rate is set by political choice via monetary policy. It is absolutely feasible to keep the interest rate as low as desired. Just look at Japan: they have a debt-to-GDP ratio beyond 200%, and yet their interest rate has been at record lows for two decades now. [1]

Also, I hate to burst your bubble, but the debts from the Second World War were never paid off. If you don't believe me, check the numbers from the source itself. The debt-to-GDP ratio did drop, but that happened because the economy was growing. The debt itself was never paid back. [3]

And that last part is really all you need to know to understand how to get out of the current situation: trying to cut the deficit and/or reduce debt is self-defeating. The only reasonable [2] way to improve anything is to get spending going so that the economy can grow.

[1] One caveat is that with the interest rate at or close to zero, a different policy tool may be necessary to dampen excessive private lending. I would suggest a flexible adjustment of capital requirement ratios for that purpose. (And while I would advocate getting rid of those interest payments, I also advocate caution. Such a change needs to be implemented slowly, over the course of many years.)

[2] Of course you could also reduce the debt simply by introducing a tax on the ownership of treasuries. Once you really understand the operations that would be involved in that, you should also understand just how ridiculous all those worries about the debt really are. (And yes, of course such a tax would be utterly stupid.)

[3] You know what's funny about the whole paying-back-the-debt discussion? The owners of US debt as a whole actually don't want to be paid back! After all, they enjoy a risk free income stream thanks to them.

There are two things. Let me first explain why my claim that you quoted is literally right.

Most private individuals hold wealth in the form of US treasuries, either directly or indirectly, especially via retirement funds. Reducing the debt is equivalent to reducing the amount of US treasuries that are in this system. While it is true that there are some other holders of US treasuries, ultimately you cannot reduce the debt without reducing private wealth that is held in the form of US treasuries. Debt and financial assets are simply two sides of the same coin, and removing one necessarily removes the other. That's simply an accounting fact.

Now to counter your point about borrowing, there are two misconceptions.

The interest rate is strictly a function of monetary policy and is unrelated to the budget deficit or the debt. The central bank (i.e. the Fed) sets the interest rate target - this is a political choice - and then performs buys or sells (mostly of treasuries) to manipulate the interest rate in the inter-bank market until the desired target is reached.

The second point is about the amount of funds available, and there I would simply encourage you to think for yourself about how the system works. When the government runs a budget deficit, it actually increases the amount of money in the system. The treasuries that are issued simply drain the money back out. It's a wash. There is no competition between private borrowing and treasury issuance. The money used to buy treasuries would simply not be there if there were no budget deficit.

Besides, how much money can be borrowed is only limited by the amount of capital available to banks (lending is not constrained by reserve requirements or by the amount of deposits, but only by capital requirements and by profitability and creditworthiness considerations - which depend on the interest rate and are subject to Minsky-type cycles).

What do you mean, precisely, by "the federal books define the economy"? I honestly don't know what you're trying to say.

As for "the federal government drives the economy", well, federal spending is a significant chunk of GDP. If the federal government reduces its spending in an attempt to reduce a budget deficit, then unless that reduction of spending is replaced by somebody else, the GDP will fall - since the GDP is essentially just the sum of all spending over the year, there is nothing magical about it, just plain fact.

Some economists believe that when the government reduces its spending, the private sector will magically fill that spending gap somehow, independently of other factors. That would be nice, but empirical evidence starkly contradicts that belief.

This is why I conclude that an attempt to reduce the budget deficit tends to be contractionary.

Note, however, that this is not a magical property of government. It's a function of the amount of the GDP that comes directly and indirectly from government outlays.

Indeed, I phrased that part of my response rather badly because I was in a hurry. However, you would be wise not to disregard everything I say simply based on that.

The point remains: neither the deficit, nor the debt, are by themselves bad things. Targeting a reduction of debt is equivalent to targeting the destruction of private wealth, and targeting a reduction of the deficit generally contracts the economy (unless it is implemented in a very unusual manner). If you have a problem with those observations, we can of course discuss them.

The US deficit is not a problem. Seriously. The size of the US debt means nothing when looked at in isolation. Is it a large number? Sure. But compare it to the amount of private wealth, and things start looking very different suddenly.

The only problem is to optimize spending and taxation in such a way that the real outcome is good in some sense - and there needs to be a genuine discussion about what "good" should mean. I would say "good" means jobs that allow obtaining a high real living standard for everybody who wants that (if you don't want to work, that's fine too, just don't expect such a high living standard).

Then the deficit will be as small or large as is necessary to achieve that goal. The deficit is an endogenous outcome anyway; this means that the size of the deficit is not a decision by politicians, and in fact politicians can do very little to influence it (as the continued austerity measures in Britain, Greece, and other countries demonstrate). Instead, the budget deficit is simply the outcome of private spending and savings decisions. It is a matter of accounting that by itself means very little.

This is the essence of Functional Finance and the more recent Modern Monetary Theory.

So effectively, biodiversity is a worthy goal in and of itself - you actually say so yourself - because biodiversity is equivalent to redundancy. And we all know that redundancy is a worthy goal in critical systems.

I find your views on how diversity could result from market forces to be a bit naive. Biodiversity is incompatible with economics of scale, and the market naturally tends towards monopolies. These tendencies have to be actively resisted.

That said, reduction of diversity is a problem that is bigger than GM foods. There is a history of short-sighted farmers setting up monocultures that ultimately prove destructive even when no direct genetic manipulation was involved at all.

This is incorrect because of taxation. By taxation, the government forces a debt nominated in US$ on you. This implies that you have to get US$ from somebody else. Thus demand for US$ is created, giving them value.

Almost everybody believes that the US government taxes people so that they get money to spend. This is completely false, however. Think about it: the US government is the one who *creates* the US$. Saying that they need income from taxes to be able to pay out US$ is as silly as saying that Blizzard needs income from somewhere in order to be able to pay out WoW gold.

The primary purpose of taxes is to remove purchasing power from the private sector, to create a gap in aggregate demand that can then be used for inflation-free government spending. You may be interested in some of Prof. Mitchell's writing on Modern Monetary Theory, starting e.g. here.

Actually, the curriculum is part of the problem, and at least the first semester really is all about programming at many universities. So CS is really hurting itself by turning a lot of people off in the first year or so, while those who do survive the programming bootcamp will later be totally shocked when they learn about all those other things.

I found this Education@Google talk about the redesign of the introductory CS course at Harvey Mudd College interesting: http://www.youtube.com/watch?v=HF_Gkxqf158

Don't be fooled by the "Women in Computer Science" title. A lot of the talk is about this issue, but at least the curriculum redesign part of what the speaker talks about was originally not motivated by women issues. It just turns out that it helps make CS attractive to people - whether male or female - who have not spent their childhood and teens teaching themselves how to program. When you watch the talk, you will also see that by "attractive" they don't mean "dumb it down to make it accessible". Rather, it means "remove stupid obstacles and rituals, and care about the things that truly matter instead".

Their situation is special because their students only choose their major after having taken introductory CS courses, but similar lessons could certainly be applied at other universities anyway, as well as at highschools.

Your story for gold still doesn't really add up from where I'm standing. Are you really saying that a material that satisfies a) through e), but has no purpose in production or art or jewellery, would become a store of value? Can you explain how people would suddenly get the idea of hoarding something that is worthless?

I don't think so. For some strange reason, pretty much every non-toxic material we've found (and most toxic materials as well) actually has been put to use, so our theories are a bit difficult to put to the test. However, imagine something like gold, with the difference that it looks ugly (so that nobody wants to use it for jewellery), and perhaps has even come to be associated with bad luck for some bizarre reason (since it is ugly, it might be associated with the devil, or witchcraft, or evil in general, or whatever). The material satisfies all your conditions (a) through (e), but I find it hard to buy the theory that such an "anti-gold" material would become a store of value.

My counter-theory is that you need your points (a) through (d), combined with

(f) It has some intrinsic value for production (or art, etc.) to begin with.

for a material to become a store of value. That is really all that I'm saying. The point (f) is how people get the desire of using gold as a medium of exchange or store of value. Your points of (a) through (d) are simply what makes it exceptionally feasible. I don't think we actually disagree here, I just want to emphasize that you really do need both factors.

(I believe your point (e) is not really relevant by itself - after all, people thousands of years ago wouldn't have been able to tell the difference anyway; but probably more complex molecular compositions would either corrode or otherwise decay naturally, and so would not satisfy (a) and (b), which makes (e) redundant)