Why is health care so expensive?
There are a lot of explanations, but another one occurred to me this morning. I am not an expert, so tell me if I'm completely naive, but here goes:
- What keeps prices low in any other industry? Competition, right? If company A raises its prices too much, I go to company B.
- This all assumes a transactional scenario where I buy stuff directly from company A or B and where I have the freedom to switch companies at any time. The medical equivalent scenario is one where I can buy services directly from one doctor, and go to another doctor if the first one charges too much.
- Most people do not pay doctors directly, but go through insurance companies. The insurance company pays (most of) the medical bill; it also limits the doctors I'm allowed to choose from.
- Most people do not buy their insurance directly, but get it through their jobs. The employer chooses the insurance policy.
- The health benefits may be a factor in me choosing where to work, but it's unlikely to be the main factor in my choice compared to location, salary, type of work, whether my boss is tolerable, etc.
- Thus, I don't deal with the doctor directly. There's not just one, but two intermediaries between me and the doctor: there's the insurance company, and there's my employer.
- So if the doctor wants to charge more than I can afford, I can't just walk away and go to a different doctor, because my doctor choices are limited by my insurance. And I can't just switch insurance, because my insurance choices are limited by my job. And changing jobs isn't realistic.
- Besides, nobody will cover a pre-existing condition, so as soon as something is wrong with me, my choices are whatever insurance I've got, or nothing.
- For all these reasons, my ability to negotiate over the price of my health care is effectively nonexistent. I can't pressure anybody into reducing costs because I don't have the freedom to walk away from a provider who is too expensive.
- The doctors don't get paid by me, so they have no incentive to negotiate price with me; they get paid by the insurance company, so their incentive is to charge the insurance company as much as they can get away with charging.
- The insurance company gets paid the same (by my employer) whether they cover my care or not, so their incentive is to deny coverage in as many cases as possible.
It all boils down to the fact that in this system, consumers can't exert downward competitive pressure on the cost of health care, the way they can with services they buy directly.
Of course there are a hundred other reasons that also contribute to the high cost, but I think this is significant.
I don't have a solution to propose; I'm just trying to understand the nature of the mess we're in, so that I can form an informed opinion on the current debate over health insurance reform.
Why is health care expensive, part 3
Atul Gawande ("He's ranked higher than me on Google" complains my friend Atul Varma) is a doctor who also writes articles about the state of the medical industry.
He recently attempted to get to the bottom of why health care costs so much. He did some investigative reporting into two towns in Texas - McAllen and El Paso. They have the same population, same demographics, same level of medical technology, and one is not noticeably sicker or healthier than the other. But one spends twice as much on health care. Why?
Here's the article. It's definitely worth a read.
Dr. Gawande's conclusion: the main factor to blame is a cultural shift in the doctors themselves. Since the 1990s it has become more and more culturally acceptable among doctors in McAllen to assign treatments on the basis of how much the doctor will earn by doing them. El Paso hasn't had a similar change in attitudes.
Blaming the doctors themselves? Controversial! But you should read the article and see what you think of the evidence Gawande presents.
Gawande contrasts the McAllen situation against the Mayo Clinic, which is known as one of the highest-quality hospitals in the country as well as one of the most affordable. At the Mayo Clinic doctors are paid flat salaries, instead of charging fees per procedure. That means they do not have any incentive to pick more expensive treatments just for the sake of charging more. Maybe that puts them in a better position to find the best balance of price and effectiveness when choosing treatments.
Could moving from fee-for-service to doctors-on-salaries be another part of a long-term strategy to control costs?
A mandate is a law that everyone must have health insurance (if they don't, they'll face some kind of penalty.) Like right now we have mandated insurance for cars (you can't drive without insurance), but not for people.
During the election, Obama said repeatedly that there was no mandate in his health-care plan; he would impose no penalty on people who don't get insurance. (Remember the face that John McCain made when Obama said during one of the debates that the penalty would be zero? It was amusing.)
A thing we tend to forget during presidential elections is that presidents don't write legislation. Congress does. So it's meaningless to talk about "Obama's health-care plan". Even if he'd rather not have a mandate, Congress might pass one anyway. Most of the chatter has been about stuff like the public option, but even if there's no public option in the final bill there could very well be a mandate. It would be a huge change, so I want to understand what it would mean.
So, what's the deal? Why is a mandate something that we would want to pass? I mean, there are a lot of people who can't afford health insurance, right? If you legally punish them for not buying it, that's not magically going to make them able to afford it. You're just punishing them even further for being poor. So what's going on here?
The first thing to understand is the risk pool, and who's not in it.
Among the 45 million Americans who don't have health insurance, there are two groups of people. There's people who choose not to buy it because they are healthy enough that they don't think they need it and/or rich enough to pay out of pocket for anything that goes wrong. The insurance companies would love to have more of these rich, healthy people on board because they make the risk pool less risky, but the people aren't interested.
The other group is people who are poor and/or sickly enough that the insurance company either won't cover them, or that the price it sets for them is more than they can afford to pay. These people would love to be on insurance, and those who see universal coverage as a moral obligation would love to get these people onto insurance. But the insurance companies don't want these people on board because they make the risk pool more risky.
If you believe we have a moral obligation to get universal coverage for the poorest and most sickly, then how do we do that without overwhelming the risk pool? The obvious way is to add the poorest and sickest to the risk pool along with the richest and healthiest, who would balance them out. But we alread know these are people who don't want to join. You would have to force them to. Thus, a mandate.
The other thing to think about is "No more discriminating by pre-existing conditions", i.e. insurance companies can't charge you more or refuse you coverage because you've already got something wrong with you.
"No more discriminating by pre-existing conditions" sounds great, especially if you're one of the poorest/sickest people. But if we passed a non-discrimination law, and did nothing else, think what would happen. You could wait until you get sick and then buy insurance to cover your problem. In fact, there would be no reason to do anything else. Nobody would buy insurance until *after* they got sick. And at that point it's not insurance anymore. Every user of the system would be pulling more out of the system than they were putting into it. The system would collapse.
But if you have non-discrimination law AND you have mandates, then maybe it would work. You can't game the system and buy your insurance after the fact, because you're mandated to have insurance first. The non-discrimination law would make insurance affordable to the sickest people, who would then be able to obey the mandate.
So a mandate by itself would be bad, and non-discrimination by itself would be bad, but together each one could prevents the worst problems of the other, and together they make up something like universal coverage. Next time you hear people talk about mandates, or about not discriminating by pre-existing conditions, remember that neither one makes sense by itself, but they might make sense together.
That's the theory, anyway. Would it work in practice? Is it the right thing to do? Is it even constiutional? I don't know.
Why is health care expensive, part 4
Insurance companies face almost no competition (PDF link).
According to that report, most states are effective monopolies or duo-opolies; regulations prevent companies from competing in other states, and mergers have reduced what was left (400 mergers between health insurance in the past 13 years). 94% of insurance markets are highly concentrated, meaning almost entirely dominated by one or two companies.
When people (or, to be more precise, their employers in most cases) don't have a choice of insurance company, there's nothing to stop insurance companies from raising premiums as high as they want and reducing coverage for anything that would cost too much.
This is why insurance premiums are increasing 4 times faster than wages. Premiums have gone up 87% over the last 6 years.
Is your insurance coverage 87% better than it was 6 years ago? Are you 87% healthier? Has the process of treating the sick somehow become 87% more expensive? I don't think so. I think insurance companies are taking more and more of our money, and keeping it, just becaus they can. Top health insurance companies are reporting amazingly
high profits even during the recession.
While the auto industry and the financial industry have been falling apart and needing to be bailed out by the government, while unemployment has gone up to 9.5%, the top three insurers averaged profits of $2.4 billion each for 2008.
I'm not going to say that we should decide how much profits a company is allowed to make, or say that a company is evil just because it's making a lot of profits, but I will say this: high profits are a sign of low competition. If there was an efficient, competitive market, then more companies would be operating on lower profits and passing the savings back to the customer in order to stay competitive. That's obviously not happening.
If we want to increase competition, and I think we do, one way is to loosen the regulations that prevent companies from competing in other states. Another way is to establish an alternative insurance organization to compete with for-profit insurance companies. This could be the public option, or some kind of user-owned 'co-op' insurance companies as has recently been proposed. If such an alternative didn't have to worry about pleasing shareholders or buying yachts for their CEOs, maybe they can give consumers a better deal, and put some competitive pressure downward on private insurance companies.
Remember, when you hear talk about a public option, that the point is to increase competition. Some people are freaking out about 'socialism' but increasing competition to drive prices down is really the most capitalistic type of reform imaginable. Also remember that the public option is just one means to an end, not the end itself. Competition is the real goal.
Of the one-million-plus personal bankruptcies that happen in America per year, over 60% are directly due to medical bills.
That's a family having a medical bankruptcy every 90 seconds. It has gotten much worse between the last time such a study was done, in 2001, and when this study was done in 2007. Scariest is that 75% of these bankruptcies are from people who had health insurance. I repeat, they HAD HEALTH INSURANCE. It failed them when they needed it most.
From the article:
"Across the US, 25 per cent of employers cancel coverage as soon as an employee has a disabling illness while another 25 per cent cancel it within 12 months."
A common scenario leading up to bankruptcy is that insufficient medical care leads to people getting sicker, until they miss too much work, which leads to them losing their jobs, thereby losing their health insurance, becoming unable to afford care at all, ending up sick, broke, jobless, and homeless. It's a literal death spiral.
So you might hear "Only 15% of Americans are uninsured" and think "Hey, that doesn't sound too bad". But it's not just the 15% of us who don't have health insurance that we should be worried about, it's the other 85% of us too, for whom health insurance isn't doing what we paid for it to do.
Literally the only thing that health insurance companies contribute to society is risk mitigation. They're supposed to be a way to control costs. They're supposed to protect you from having to pay devastatingly high bills in the event of an accident or emergency. If they're not fulfilling that function, then why do they exist?
Why is health care expensive, part 5
Because of fear of lawyers?
83% of physicians surveyed reported practicing 'defensive medicine'. They do procedures they don't think are neccessary because they're afraid of being sued for not doing them. And they pay for malpractice insurance. Predictably, the doctor lobby is strongly in favor of tort reform, while the lawyer lobby is strongly against it.
However, studies show malpractice awards are not the main driver of health care costs, says this article from the Washington Independent. We might save some money by tort reform, but it's unlikely to be the main way to get costs under control.
There's a lot of interesting facts in that article. Apparently the cost of malpractice is calculated as only 2% of overall medical spending, so maybe there's not much savings to be had there. On the other hand, nobody can calculate the ultimate cost of defensive medical treatments. On the gripping hand, Texas already capped pain-and-suffering awards at $250,000 and had "a dramatic decline in lawsuits", but Texas still has some of the most expensive healthcare in the country. 29 other states have also done some sort of capping of malpractice awards, so it's not clear what else could be done in those states. Plus there are concerns that the Texas system makes it hard for people who have been legitimately harmed by real malpractice to get fair compensation for it.
A lot of points of view on tort reform, pro and con, are brought together in this Daily Dish post.
Why is healthcare so expensive, part 7
Because we rely on insurance too much?
I just made a dentist appointment for this Friday, for a routine checkup and teeth cleaning. Of course, the first thing the dentist asked about was my insurance coverage. I read her a mysterious number off of a plastic card that Mozilla gave me, and then she was happy.
Routine dental checkups and teeth cleaning is an entirely predictable procedure with what should be a low, predictable cost. Have you ever thought of how weird it is to that we use insurance to cover entirely predictable costs?
We don't use auto insurance to buy gas. It would be insane. Insurance is for accidents, it's for unpredictable costs. But people use health insurance to pay for routine checkups or monthly pill supplies. You almost have to use insurance because the price of basic services and supplies is absurdly inflated, under the assumption that an insurance company is going to be paying for it. Imagine if gas cost $50 a gallon but your auto insurance paid for it. That's the situation we have with health care. (It's often been pointed out that Americans tend to take better care of their cars than of their own bodies.)
When you pay with insurance, you're paying with somebody else's money. When you're paying with somebody else's money, there's no incentive for the patient to look for a good deal, and there's no incentive for the doctor or the hospital to economize on their costs, as I've pointed out before. The costs all come back to us eventually in the form of higher insurance premiums and more people dropped from insurance coverage.
Why do we have a system where we pay for everything with health insurance? It started, believe it or not, as a way to get around wage controls during WWII. Health benefits were not covered by wage control laws. After the war the wage controls ended but in 1954 Congress created a tax loophole that makes health benefits tax-free - meaning that it is far cheaper for a company to pay somebody a dollar of health insurance than to pay them a dollar of salary. This is the single biggest loophole in the federal tax code and is considered by many economists to have a massive distoring effect on the economy. (You may recall that during the campaign John McCain proposed ending this tax loophole. Not a very popular idea, but it might actually have been a good one.)
This is a really good article here: How American Helath Care Killed My Father, by David Goldhill. Despite the sensationalistic title, the contents are quite reasonable and thought-through and fact-based. It's long (six pages), but read the whole thing. Then bookmark it and read it again tomorrow. There's a ton of juicy information in there, like the fact that America has one health-insurance-company employee for every two doctors, a sure sign that insurance is too big.
Goldhill estimates that if all the money our employers take out of our paychecks to go to medicare and health benefits was simply given to us as cash instead, the average person would be getting back something like $1.77 million over the course of their lifetime; and that if we put this into a savings account and paid for routine care directly, we'd be getting a far better deal. Prices would come down because we'd cut out the middleman, because people would be spending their own money and so would have an incentive to save, and because providers would be directly competing to serve customers.
We'd still need insurance to cover the truly catastrophic events. So Goldhill proposes a system where everybody has a HSA (Health Savings Account) to pay directly for routine care, and is also enrolled in a single mandatory nationwide insurance program that covers only emergencies.
I think there's a lot of sense in that. But there's no political will for anything like that. Right now the Democrats are only talking about expanding insurance coverage, not cutting it back to the places where it makes sense.
I found out the other day that Mozilla actually offers an HSA (Health Savings Account) plan as an alternative to the Anthem PPO health insurance that I have now. I looked into it a bit to see how it works. The nice thing about the HSA is that I could put money into it from pre-tax income. I pay almost 30% in taxes, so this is quite significant. The HSA comes with a high-deductible insurance policy that only pays for stuff over $5,000 (for the family plan) - in other words, it only pays for the truly catastrophic stuff.
However, the reason that I chose not to switch to the HSA plan is that Mozilla would not be redirecting the money that they're currently using to buy me insurance and put that amount into my HSA; instead, they'd just keep it. If I wanted money in my HSA, I'd have to take an additional chunk out of my salary to put there. Because of that, it doesn't make sense to switch, especially when the PPO alternative is so generous.
This is an example of how it's really hard for one person to break out of the system by themselves. It's a collective action problem. Even if widespread use of HSA plans would lead to a better health care economy overall, nobody wants to be the first one to switch because they'd be losing out by doing so. Switching America onto HSAs would require a complete overhaul of the system, a complete rewrite of the rules for employer/employee health care payments and tax deductions.
Why the hell are we subsidizing homebuyers now?
So you may have heard that the government is handing out $8,000 credits to people buying houses for the first time. Certain people have even urged me and Sushu to buy a house while this subsidy is still in effect. (Never mind the fact that the price of houses in Silicon Valley means that $8,000 is less than 1% of the cost of a small house, so it would be a mere drop in the bucket.)
This seems like really bad policy to me. This soon after the housing bubble (combined with epic amounts of speculation with borrowed money) destroyed our economy, when we still haven't finished unwinding and deleveraging all the bad investments from the housing bubble, why the hell would the government enact a subsidy that seems designed to encourage re-inflation of the housing bubble?
It reminds me of this Onion article come to life: Recession-Plagued Nation Demands New Bubble To Invest In.
Anyway, it seems like my intuition was right, because everything I read about it says that economists all pretty much agree that It's a horrible policy that could wind up prolonging, if not worsening, the housing crisis.. And yet, it sailed through the Senate with basically no opposition; it was nearly a unanimous vote. Yes, the Senate, the same body that can't agree on bathroom breaks without a month of grandstanding and obstructionism. From the same article:
This is something where despite bipartisan opposition to it from experts, there seems to be massive bipartisan support for it on Capitol Hill.
Senators know nothing about economics? What a surprise!
We're apparently throwing $35 billion into this housing subsidy despite the fact that the government subsidizing mortgages and making credit artificially easy is part of what got us into this mess in the first place!
Meanwhile The Economist says that even though we probably do want the government to give money away in order to put demand back into the economy, the housing credit is about the least efficient way imaginable to do so since most of the money goes to people who would have been buying houses anyway and are now just buying slightly bigger houses. There are so many better ways we could be spending those $35 billion, such as hiring unemployed people to do public works projects, FDR-style.
Not only that, but people have apparently been committing all kinds of fraud in order to collect the free money.
As if all that weren't bad enough, finally there's the fact that the subsidy is
encouraging evnironmentally harmful land use and energy use patterns, because single-family houses are less efficient to heat and require more driving compared to apartments.
If you ask me, Americans need to get over this idea we have that everybody should live in a house with a yard and a picket fence. There's nothing wrong with renting, and we don't need the government to intervene to tilt the balance of the economy away from rentals towards homeownership. Even more than that, Americans need to get over this idea we have that houses are primarily an investment, a source of free money, that they always increase in value, and that you can always borrow money against them with no risk. Americans lived in this fantasy for decades, and even now after it's been shown to be a fantasy by the near collapse of the economy, people want the government to cast a spell and make them believe in the fantasy again?
Crowdfunding vs. DRM as the future of publishing
None of the songs I bought from the iTunes store will play any more because Apple thinks I've authorized them on too many computers; and I can't remember my Battle.net password so as far as Blizzard's concerned I no longer own that copy of Starcraft 2 I paid $60 for.
It used to be I only had to worry about losing my digital "posessions" when a magnet got near my disk drive or when an OS upgrade made my old data formats obsolete, but now... well, let's say I'm very reluctant to pay real money for an intangible electronic "product" when it can be taken away from me any time at the whim of an overzealous and glitchy DRM scheme.
This is why I'm not real keen on the idea of e-books; I like books that I can trust to stay on my shelf and continue existing even if the publisher changes their mind. Sushu's got several Kindles and was telling me about how you can now "loan" e-books to other people - the book is gone from your own Kindle for two weeks, then it comes back. (She likes this because books that she loans out the old-fashioned way pretty much never come back to her, she says.)
It's weird to think that some programmer had to write code whose sole function is to take a file that's still there on your Kindle and lock you out of it for two weeks. I imagine him at a Starbucks, swapping tips with the programmer from Blizzard who prevents users from playing Diablo 3 single-player without a connection to Blizzard's servers.
On a computer, every "move file" operation on a computer is actually a "copy file" followed by a "delete original". The "delete original" step is optional. The default state is for everybody to have as many copies of a file as they want; to reproduce the scarcity of the physical world takes work. Companies are paying workers to make there be less of their products.
Yeah, yeah, yeah, I know. If we let everybody have copies of all the books they wanted for free, then writers couldn't get paid, and we wouldn't have any new books at all. I get that. It's just that, as people have been saying since at least the 90s, the publishing industry should really be coming up with new business models instead of trying to fight technological progress.
For a while we thought that new business model would be advertising. But web advertising has mutated into a creepy track-you-everywhere commercial panopticon, even as advertising fails to sustain print media. The value of web advertising is dropping as well. Advertisers can now see exactly how few people are clicking on their ads, and offer prices accordingly. Besides, I think relying on advertising too much puts the creators into an unhealthy relationship with readers: if the advertiser, rather than the reader, is the one paying your rent, then you have the incentive to do what the advertiser wants, even if the reader doesn't want it.
Lots of creative people on the web have moved to merchandise-supported model. That's great if it works for them, but many types of work (say, non-fiction books) that don't lend themselves to merchandise at all. And besides, there's only so many T-shirts the average comic-reading nerd can fit in their closet. Mechandise seems very limiting.
I donated to my first project thinking "huh, one of those ransom model things? OK, well, they won't take my money unless funding succeeds, so there's not much to lose; let's try it". I didn't think much more about it at the time. But as I've watched Kickstarters get more and more attention over the past few months I'm starting to think Kickstarter, or something like it, might be the answer.
(Obviously Kickstarter did not invent the ransom model of publishing; I know Stephen King did a book that way over ten years ago.)
But here's the thing: Kickstarter-style crowd-funding is one of the very few ways where the creator is actually getting paid for doing the work of creation. With advertising you get paid for delivering customer eyeballs to advertising, and that indirectly funds the creation of the work. Even with traditional publishing, the money comes from rectangular masses of dead tree pulp being shipped around to stores, and the sales of these objects refund the publisher for the advance they gave the author for work already completed.
The work of a creator is to make a thing exist which never existed before. Kickstarter relates this to money in a very direct way: if enough fans say "Yes, I am a potential audience member, and it's worth $X to me for this thing to exist", then they pool their money and the creator gets it. And the successful Kickstarters generally seem to be the ones where the creator explains why they need that amount of money, and what exactly it will be put towards -- the ones where the costs are transparent and justifiable, in other words.
I could even see somebody in the future making a living off of one crowd-funded project after another, setting the funding targets of the projects to cover all their living costs, and not even having to care about piracy or DRM or artificial scarcity. Who cares if some people get a pirate copy, if you've already been paid the value of your time and labor for making the thing exist?
Maybe the bigger risk is that a "creator" will take everybody's money and then never deliver the work. There has been at least one high-profile attempted Kickstarter scam already, but people got wise to it before it was funded and it got taken down. Sooner or later somebody will do a scam competent enough to succeed. It will be interesting to see what happens to Kickstarter then.
I read this interesting article today about how the Kickstarter website doesn't show you the 56% of projects that fail to meet their funding target. He says 56% like it's a bad thing. A 44% success rate is amazing, far higher than I imagined. And it's good that some projects don't get funded. The funding process is a way of gauging interest. If the interest isn't there, won't you be glad to find that out up front? You don't waste time making the thing and you don't go into debt financing it.
So yeah, projects fail. There are still no guarantees of success. Getting publicity for your kickstarter is still hard. There is only a finite amount of donor money out there, and a finite amount of donor attention. (Attention may be even scarcer than money). People who are already famous from other projects have a huge advantage getting attention for their Kickstarter campaign.
But none of those problems are new. It's always been hard for first-time creators to get attention for their work. There's always been competition for a limited number of audience dollars. That's part of the service that publishers provide - they know how to generate publicity. In fact, generating publicity may soon be the only function of publishers that technology does not render obsolete. (Well, that and editing. Editing is a valuable service and most stuff published on the internet would be a lot better if it had some!)
Maybe in the future, a "publisher" will be somebody you hire to manage your crowd-funding campaign for you? And the trustworthiness of the publisher's brand will be part of what convinces potential donors that you're not a scam -- that they can trust you to actually finish making the thing. It's also a reassurance that you meet somebody's standard of quality.
After all, there may be no limits on file duplication, but there are still limits on audience attention span, so that's the resource we need to pay attention to. The future will be interesting!
Bitcoins!!! Definitely the currency of the future and not a speculative bubble at all!
You may have seen recently that Bitcoins lost half of their value in one day. This may have frightened you into thinking that Bitcoins are no longer a safe retirement plan! You might be thinking that Bitcoin is nothing more than an interesting experiment in solving the "double spend" problem of virtual currency without a centralized verification service. You might even think Bitcoin is a giant scam designed to take money from naiive libertarians!
Fear not. I'm here to reassure you that Bitcoins are the future! Just consider all the advantages that Bitcoin has over your precious "fiat currency" with its "governments" and their "laws" and "regulations":
- A great incentive to learn computer security and maintenance, since you lose all your money if your hard drive crashes!
- Exchange rate vs fiat currency fluctuates by orders of magnitude from day to day, making it impossible to plan purchases or budget anything!
- Great for money laundering, black-market purchases of illegal goods, and income tax evasion! You can anonymously buy illegal drugs, child pornography, and bomb-making materials!
- If you want to buy food or clothes or pay rent you'll have to exchange your Bitcoins for dollars first, but this is just a temporary inconvenience until MacDonalds and Wal-Mart start accpeting Bitcoins, which they'll have to start doing any day now or they'll be left out in the cold when Bitcoin replaces all government fiat currency!
- Nobody can help you if you're a victim of fraud. Fraud prevention would require non-anonymous transactions and/or a central authority to resolve disputes, both of which are contrary to FREEDOM! Fraud is just part of The Free Market, so get used to it! Caveat Emptor, statists!
- Mathematically guaranteed to be deflationary, since there's a finite supply and Bitcoins will go out of circulation over time due to computer failures. Nobody in this utopian virtual economy of the future will want to spend Bitcoins on goods or services when they could be hoarding their Bitcoins to sell later! Don't you know that "incentives to hoard" are an important part of any exchange medium?
- Since they're super cheap right now, this is a great time to trade all your fiat currency for Bitcoins. Do it now, so you can get in on the next bubble! Wait did I say bubble? I meant completely justified increase in value, driven by all the people abandoning fiat currency for Bitcoins! A heavily hyped-up asset whose price shoots up by thousands of percent in a short time with no change to the underlying fundamentals is always a good stable currency and not a speculative bubble at all! The one who benefits from the next price increase will definitely be you, and not one of the early adopters who's been hoarding massive amounts of BTC since the easy-mining days, waiting for a chance to cash out. Listen to those guys, they're smart. When they tell you to buy BTC and thereby increase the value of the BTC they already hold, they only have your best interests at heart.
- Be part of an exciting online community! Join your fellow internet anarchists and Ron Paul fans and have fun ranting about the evils of the Federal Reserve, "fiat currency" (AKA any money not made of gold), and "coercion" (AKA living in a country with laws). Hoard ammunition and canned food to prepare for the imminent collapse of the U.S. economy due to "socialism" (AKA any government that collects taxes to pay for services).
- Did you know that dollars haven't been backed by gold since the 1970s? They're, like, just pieces of paper with no inherent value, man! Did I just blow your mind??? They're "fiat currency" which means the government could print as many as they want! And I bet the government is just itching for a chance to undermine its own authority by intentionally making its own currency worthless with massive economy-destroying inflation! They're probably going to start doing that any day now! Wake up, sheeple!
- But with Bitcoins, the supply is limited to 21 million! That's all the Bitcoins that will ever exist, thanks to the arbitrary will of some anonymous computer geek nobody's ever met who goes by the pseudonym of "Satoshi Nakamoto"! That means that Bitcoins are literally as good as gold, because the value of a currency depends entirely on scarcity and not on what people are willing to trade you for it (Don't listen to those economists who say the gold standard is a stupid idea. They're trying to trick you!)
- Feel like a big shot when your "mining rig" (thousands of dollars worth of graphics cards and power supplies) manages to cryptographically "mine" its first bitcoin after running for just a month! Sure you've lost money, but everybody on Reddit will be real impressed!
- You might think all the decentralization would make Bitcoins inconvenient to use, but don't worry: the fans of decentralization have settled on a single centralized place to trade your decentralized currency! It's called MTGOX which stands for Magic: The Gathering Online Exchange (because it was created for trading Magic cards and then pivoted to trading Bitcoins) and despite its reputation for horrible lag, a huge majority of all exchange between BTC and USD go through MTGOX -- giving MTGOX all the power of a central bank, with none of the benefits and none of the responsibility. MTGOX may even be manipulating the Bitcoin exchange rate for their own financial benefit.
- There is no way the government could ever crack down Bitcoins, because they're anonymous and decentralized! If they shut down one Bitcoin exchange, another will arise to take its place! Viva la revolucion! Nobody can stop our glorious free market! Sure, they could crack down on the endpoints where people exchange BTC for US dollars, making it impossible to exchange Bitcoins for goods and services from the real-life economy, but who cares! We don't want your worthless US dollars anyway! We can get everything we need on our online black market! (All a healthy economy needs is drugs, porn, server space, and Reddit karma, right?)
- Never pay taxes again! When the IRS tries to collect, tell them that your income was $0 last year! Since you took payment only in pretend internet money and not dollars, they can't tax you anything! There is no way the IRS will charge you taxes based on an estimate of the dollar value of your income, nor will they be able take your ass to court for tax evasion when you refuse to pay up. No, the IRS will be totally stymied by a simple technicality. Bitcoins are untaxable!
- Learn the hard way why the real-world financial system has all of the regulations and safeguards that it has built up over the last few centuries! Sure you could learn about speculative currency bubbles, pump-and-dump schemes, and Ponzi scams from a book, but isn't it more exciting to be a part of it yourself and learn from first-hand experience?
That's why Bitcoin is sure to replace all government fiat currency any day, I tell you, any day now! You'd be a fool not to trade your dollars for BTC.
(Buy mine? Please?)