Interestingly the economist misses the traditional definition of Fiat: a currency whose value is determined by the Fiat of a state. Whether or not Bitcoin exhibits similar trends as currency that isn't backed by the state is immaterial to the ethical appeal (to some) of a medium of exchange where participation is voluntary and consensual.
"Code is governance" -- the article does support the idea of cryptocurrency as fiat money because the laws, in this case, are the code. The developers and miners, no matter their good intentions, do hold power over the currency that everyday investors do not have. No matter how egalitarian the distributed ledger set up looks on paper, we'd be remiss to think the power structures behind cryptocurrencies are so radically different from the fiat currencies developed in the past and used at present. With time, especially if the cryptocurrency bubble pops, we'll be sure to see those structures made more explicit than they seem now.
Yes, that's the distinction. With Bitcoin, a codebase prevails if it attracts enough miners, merchants and users. Those parties in aggregate have "fiat power".
It's arguable that fiat power for each state similarly reflects preferences of banks, merchants and users. However, some of us doubt that money policy typically favors users.
With government fiat, forking isn't really possible, without a revolution, no matter how unhappy users are. But with Bitcoin etc, that is possible.
It's a common misconception that miners drive Bitcoin policy. In my opinion, miners are parasitic. When I first started using Bitcoin, there were virtually no professional miners. Users did all of the mining, locally. So difficulty was very low. Now, with so many professional miners, difficulty is very high. However, blocks get solved in 10 minutes on average, just as they did in the beginning.
Anyway, it's true that Bitcoin is a fiat currency. But governments aren't in control, and that's a good thing.
This is a big misunderstanding of bitcoin, and if you believe it I can understand why you might think bitcoin is not special.
The truth is that the everyday user gets full control over the law of their currency simply by running a full node. Your node will reject any transactions that do not comply with the rules of your node.
The soveirgnty of bitcoin comes from knowing that the devs can't force an update upon you or the network, if you do not consent you can always reject the change.
Right, the same people telling you it's going to $100K are the ones saying this is a digital currency that should be spent. Well, I sure ain't about to spend $100K to buy 2 MacBook Pros.
Sure, some people treat it as an investment that can be hoarded, but that doesn't change the fact that it can be exchanged. Your narrow definition of medium of exchange sort of excludes any deflationary currency that someone may hold on to as an investment.
It could even be expanded to include inflationary currency in a country where hyperinflation is occurring. People will hold on to USD or some other currency as an investment because it'll be worth significantly more tomorrow than whatever currency the supermarket down the street accepts.
A medium of exchange is usually an asset that can be exchanged for any other asset. It's not that bitcoin can't be a medium of exchange, it just isn't one yet.
I wonder if part of this is due to dust. My understanding is that at these prices you don't really want to split a coin for a $.25. As a result it's poor for micro payments and daily macro payments alike.
I don't think the point eluded the author, at all. The article pretty clearly talks about financial innovation throughout history and then how it got coopted by states. The author seems pretty familiar with the history of finance and economics, actually.
A state doesn't really have control over the value of its currency. It may control how much of it exists in circulation. Likewise, the Bitcoin software tightly controls how much Bitcoin is in circulation. Both limits are done by fiat. Whether the institution doing the fiat is what you personally would recognize as a "state" seems to be a pretty arbitrary distinction. "States" are not the end-all be-all of institutions with power over individuals.
A state controls the money supply by granting itself a monopoly on money production (i.e. it outlaws the production of "counterfeit" money). Bitcoin uses a different strategy — while anyone is allowed to make bitcoins, the increasing production costs ensure there will only be a limited supply. At leasts that's my understanding of how bitcoin works. At any rate, none of this has anything to do with being fiat money. Fiat money means that the money is backed by "trust", i.e. people accept it as currency because they trust that others will also accept it.
If the stores are not forced to use Bitcoin and are still allowed to accept other forms of payment but simply choose not to, then yeah, it's voluntary.
Go find someone who's willing to take whatever you're trying to use instead, why should other people have to take your form of payment against their will?
Fundamentally, Bitcoin is software eating the Fed-Bank-Retail ecosystem. The Fed governance is replaced by code. The banking utility is replaced by miners.
I think the march of bitcoin is actually a better example of how AI is taking over the world. People in AI are fascinated by AGI - but the bitcoin ecosystem is actually a real world example of how AI will take over the world.
Specifically, the march of AI won't happen at 'edge' nodes, it won't be incremental, it won't happen by replacing humans with machines. The march of AI will start at the core, at a rethink of the fundamental infrastructure that powers an industry making it more amenable to machines and 'hostile' to most humans.
People underestimate the amount of resources required to articulate monetary policy by a central bank. Bitcoin can already do that much better than maybe 70% of the worlds central banks. India, China and US can think about banning/regulating bitcoin. But there are countries in Africa who can already do better by simply leapfrogging to bitcoin and ditching their national currencies.
> But there are countries in Africa who can already do better by simply leapfrogging to bitcoin and ditching their national currencies.
I doubt this would do any good for them.
* Their currency would be totally exposed to 3rd parties.
* They would loose the control over the rates, which are an important tool to attract investments, if are stable and controlled well.
* AFAIK some Chinese private companies control large part of the mining network. Basically the central bank would be in private, and foreign hands.
* The slow transactions would make it totally infeasable for use in everyday life, especially as people there have limited access to necessary technologies (stable network connections all round the countries, stable electric power everywhere), so daily transactions of the ordinary people would either fall back to barters, or use some fiat paper money, eg. USDs.
I totally don't get how could you reach tis conclusion, your whole post is a SV bubble wishful thinking with some trendy bullshit, eg. software eating the FED, fed is replaced by code. Bitcoin does better than centralbanks. If some currency looses 30% of its value a single day, that is not a sign of health, and this happended the very week with bitcoin. Actually Bitcoin does its job worse than an african dictatorship's currency, if its job is being a fiat currency, which is useful for the people in daily life.
I doubt its job is that, so it may do its job well, but for this task it is unsuitable.
Everything that you mentioned is most likely a shortcoming of the current version of Bitcoin. That being said, it is not a big leap of faith that each of these will be rectified in due course. If not with updates to Bitcoin, then with another coin.
My post wasnt just about Bitcoin specifically, but around the entire blockchain ecosystem.
>"People underestimate the amount of resources required to articulate monetary policy by a central bank. Bitcoin can already do that much better than maybe 70% of the worlds central banks."
Bitcoin only has totally clear monetary policy because it's increase of the money supply is entirely predetermined: It is created at an ever decreasing rate approaching a limit.
The result of this certainty in monetary policy is a currency that is naturally deflationary (literally by definition). This makes Bitcoin perfect as digital gold but shit as a functional unit of currency. You don't want to spend an asset that will naturally appreciate in value, discouraging using it.
You could have a cryptocurrency that generally trends at the same inflation rate as regular currencies: 2-3% annual and use that to pay the miners (or just give everyone a wealth endowment through giving any current owners a 1% increase in their current wallets and use the other 1-3% for the miners) and you would have a currency that could stay price stable with out Fiat currencies instead of always increasing in price like BTC has (at least over a sufficient moving average to reduce the volatility from speculation).
I don't get why people are obsessed with inflation. It is not the only thing that is required to stimulate an economy. On the other hand for majority of developing nations, it is a sink hole that eats their earnings alive. You can still use a deflationary currency just like an inflationary one. Just use satoshis to track bitcoin increments. I'm sure if Zimbabwe was using bitcoin, they wouldn't have ended up in the shit hole they were a few years back.
Think about it: for every dollar you earn, the government can print its own one dollar to basically halve your earnings. Why would anyone want such a thing. With bitcoin, you don't need to invest in stocks/real estate and other inflation resistant things to beat inflation. You can hold your earnings in it and you are already beating inflation.
> People underestimate the amount of resources required to articulate monetary policy by a central bank. Bitcoin can already do that much better than maybe 70% of the worlds central banks. India, China and US can think about banning/regulating bitcoin. But there are countries in Africa who can already do better by simply leapfrogging to bitcoin and ditching their national currencies.
Could you elaborate how you think bitcoin monetary policy is better than 70% of world's central banks? To me, one of the most important tasks of monetary policy is to have a stable value of a currency (not against other currencies but against stuff people actually buy). And with that measure, I have difficulties identifying one single central banks that is worse than bitcoin within the last few years. (Maybe Zimbabwe or Venezuela?) But 70%? No way.
(Note that bitcoin also fundamentally lacks a mechanism for price stability, not that anyone actually owning bitcoin would that want.)
And Africa ditching national currencies for bitcoin? How do you propose that an illiterate farmer in rural nambia is going to use bitcoin? Even if you figure that out, do you think that the african governments - crappy as they may be - are that stupid that they don't figure out that instead of paying the seignorage to bunch of bitcoin nerds who currently own the currency, they can make their own fork and pocket the seignorage themselves?
Bitcoin has no future as an usable, official currency anywhere. That should be obvious.
> But there are countries in Africa who can already do better by simply leapfrogging to bitcoin and ditching their national currencies.
This may be technically true, but probably won't happen anyhow. There's a reason that those currencies are terrible, and that reason is that a person or people in power benefit from the seigniorage that is the cause of the currency inflation.
Nobody in Africa is seriously using bitcoin to do business.
None of the BTC startups, even the remittance ones, want to touch that market with a ten foot pole (Despite their slide decks shouting from the rooftops about banking the unbanked.)
Maybe it's because BTC doesn't actually solve any of their problems.
Bitcoin can easily be stopped by governments, at least in countries that are not failed states. All they have to do is declare it illegal, and enforce the law.
It would be trivial for them to shut down exchanges. Without that, it would hard, and expensive, to convert to fiat.
Legit businesses would not accept Bitcoin. The only uses would be black market, and I doubt they would continue using bitcoin on the darknet markets. Without the ability to easily convert to the currency of the country you live in, Bitcoin would have little to no value.
Yes comrade we want to bring equality and low fees to poor nations which are oppresed by capitalistic banks! March of new era will bring better future for everyone. They want to stop our revolution, China with JP Morgan as they stand for old order. We have to get rid of those monopolistic pigs. /s
I hope those bitcoin guys won't get guns to actually execute people who are not buying.
AI? Bitcoin has nothing even remotely to do with AI - on the contrary, most support for Bitcoin is based on the idea that a totally pre-determined algorithmic management of currencies would be beneficial to the economy. So, what AI are you talking about?
please don't focus only on technical details. digital currencies, btc in particular, are breaking the bank's monopoly of creating money. that's the real revolution. states and banks get into the topic of such technologies not because its better but because they see what may happen and they want to control the outcome.
there's high potential for people gaining freedom from the west's monetary system. but i'm very pessimistic about us getting this right and not loose "control" to state and corporate powers exactly like we did with the internet.
Let me rephrase this for you:
It's great that some Chinese private entrepreneurs (connected with the intelligence services or not) are doing the fiat. That by itself is reason enough.
Fiat means "by decree" or "by authority". Fiat money is money that is decreed into existence by some authority, that is, the government. This is done through legal tender laws.
Bitcoin is not created by the enactment of some law by some authority. Fiat does not mean "by consensus", or "by mathematics". Saying code is decree, and therefor fiat, is sloppy thinking.
Bitcoin may have much in common with fiat, but that does not mean that it is fiat. It is, by definition, not fiat.
What gives Bitcoin value is not government decree, but its utility [1]. And that is somewhat paradoxical, because the more people hoard it the less utility it has. And the more its used to buy and sell goods, the more utility it has, and the more value it has.
I agree in regards to not fiat. How about the apparent utility it has as a store of wealth? If I was ultra rich I would store maybe 1% of my wealth in Bitcoin as a way to diversify my portfolio. Similar to gold, except for more wildly unpredicatable future financial scenarios.
Had a chat with a high ranking public tax official last week who said that the age of secret offshore bank accounts is over - mass leaks resulting from bounties mean that any rogue employee with a USB of account information can get a 7 figure payout from major goverments. So where to now for high net worth people/families? I would absolutely be piling my wealth into anonymous cryptocurrencies - zcash, monero, and well tumbled bitcoin. People will always want to hide assets, and this is the most reliable way in an age of mass hacks and leaks. I'm really keen to hear any pushback on this, because I can't think of any.
All the information was always out there not hard to find. Actual safety does not come from hiding and encrypting what you are doing. Safety comes from having support by the right people. For instance if you are really rich and cheat the tax man there is no problem if the tax office and the news papers don't think about you. Nobody will look.
If you don't believe it just check out the cases that were brought to light. You will find that they are very obvious and not super secret. You will find that someone in a similar position but different company/government actually profits from this "discovery". And you will find that not all cases get punished, just this one case. (think 2008 here, where they literally jailed a single banker and that was it)
Hidden in plain sight, ignored by people who want or need you to succeed. That's how this game works.
No it's not. I can't believe the comments coming out the woodwork every time a thread reaches the front page trying to hype and build a case for bitcoin. It's unbelievable. The government and IRS have no problem going after people trying to hide large sums of money and there are far better ways than putting your money in something that's a wildly fluctuating gamble at this point.
They can renounce their citizenship to the United States and then use any one of a number of different countries to do their banking. Citizens of other countries aren't subjected to the same laws and banks aren't pressured to report on them due to US influence.
An example would be Lebanon. Everyone except US citizens gets pretty good banking privacy protections. Due to US pressure, Lebanon carved out an exception to those protections, just for US citizens. There aren't exceptions for any other countries, as far as I know.
As they are high net worth families, getting citizenship in a new country won't be difficult.
The problem is getting the money out. Two issues : fundamentally you suddenly have a large amount of unexplained wealth, if you imagine that state authorities will shrug, smile and nod good luck to you think again. It is possible to use the money as a supplement to a middle class lifestyle and to find ways to get it laundered, but the first tactic is disappointing for people who wanted hot and cold running champaign on their yacht, and the second is very expensive and risky. The second big issue is that no amount of tumbling is really going to launder bitcoin, yes, you mixed it up with other people's tokens, but $4m came into the tumbler and $3m left in your direction, no court will fall for this... Just as if you put $4m in a bank account and then walked away with $3m from a different account at the same bank, the money followed you.
I remember reading somewhere that Bitcoin isn't really anonymous. I think it was fundamental to how it works to have all transactions public and on the network.
Also, it seems like a bad idea to stash much of your wealth in a system is so vulnerable to theft. All it takes is for someone to have a momentary lapse in security or put a decimal in the wrong place or some other human error and then all that wealth is gone forever.
Split your holdings into 20 portions. Invest in a range of high quality currencies and for each holding have several portions each secured with a different method. Eg. have some on a hardware wallet, some with multisig paper wallets, some buried somewhere, some with family. Generally you won't lose any. If you do lose any you are pretty well hedged.
>> Had a chat with a high ranking public tax official last week who said that the age of secret offshore bank accounts is over
....and what prompted the conversation : ) ?
The problem is that crypto can be good for a % of your illegal money, since it's relatively unproven. Any exchange that doesn't share the info will be taken down ala BTC-E (my bet is that IRS /FBI has their client list and transaction history already) so it's very very hard to spend /cash out.
If it gets our hand, of course then govts we'll declare war on cryptocurrencies
This is ridiculous. If any of these crypto currencies became a significant way to hide wealth from the government, all the government has to do is make the crypto currency illegal to use or hold. If the US did this, it could easily pop the speculative bubble in crypto coins, and your wealth would vanish.
I think you are spot on. Cryptocurrencies that fully obfuscate amounts sent, sources, and destinations, are perfectly ideal to hide assets. I think most people, even the tech crowd on HN, are unaware of their advanced capabilities.
If some of the most sophisticated operators were caught (vis-a-vis DPR (Silkroad)), why would "regular" families of wealth take a chance with crypto? I would humbly submit that regular tax evasion via LLC's, trusts and other holdings are much easier.
ICOs are the hyper speculative .com penny stocks of this particular economic cycle/bubble. A few may rise from the ashes of an eventual burst, and the general idea may be have some validity to it, but most cryptocurrencies are a sham and are going nowhere.
Bitcoin and other cryptocurrencies seem to be embraced by libertarians who are very idealistic and have quite a shallow understanding of economics, software, and the world at large. But I repeat myself.
I think the distinct holders can be classified as such:
1) Libertarian idealists who don't recognize they've already lost control.
2) Money launderers and their developing world mining networks.
3) Speculators (including VC backed firms)
4) Hype followers
5) The few, poor, misguided fools who think it's money.
«The few, poor, misguided fools who think it's money.»
I find the opposite: people who don't "get" Bitcoin tend to not know what makes money actually money, and don't know how the current monetary system works (eg. still believe dollars are backed by gold).
I'm sure that has enough truth in it. But you can characterize bankers in a similarly negative way --
particularly in light of recent economic engineering. But we all buy in to the concept of money (excuse the pun).
I've found the exact opposite to be true of a majority of cryptocurrency advocates, which makes is all that more disturbing. It's just impossible to say what the real value and future of cryptocurrencies really is.
"Bankers talk about “governance”, ways to ensure private banks and central bankers make sound decisions—so they create just enough money make commerce easier, but not so much that the system collapses through inflation or panics."
Many people don't know that central bankers literally, not figuratively, mean CREATE money out of nothing.
Someone has always been able to "create money out of nothing." At some point there was no money; some time later there was. Someone or some group of people had to create the first money. People have actually "initialized" money many times throughout history e.g. when starting a country.
As long as you can separate "money" from its representation, there is nothing particularly problematic about some people being able to create money, at least some of the time. In fact it is necessary to provide money with liquidity as the economy grows and money is needed for more and more things (liquidity problems have triggered or worsened economic crises several times in history, especially when countries were trying to base their money on weights of metals).
Not to mention that the value of a currency, like everything else, is driven by supply and demand; so in the face of fluctuating demand, adjusting the supply is necessary to ensure the currency measures a consistent amount of wealth, and doesn't inflate/crash.
Central banks do 'create' money, but they trade it on the market for real assets.
The Fed creates dollars and exchanges them for an equal amount of US Tbills (bought at market rates). $1 created = $1 in Tbills on their balance sheet.
They're not just creating money and keeping it, or giving it away.
The practice of 'fractional lending' by retail/commercial banks amplifies this, but as far as central banks go - every dollar they 'create' is essentially backed by an asset that they keep on the books for that dollar.
The idea is to manage how much currency is in circulation at any given time, so that inflation (and employment) hover at certain target.
If politicians were 'printing money' to pay national debts, or buy stuff or whatever - that would be straight forward dilution.
What the Fed does is not dilution, and it's not a bad thing, it's a good thing.
There is as much money in circulation as is required to clear the promises between people that are worth doing.
At the summit of the tree the assets are just 'other assets'. An accounting fiction.
The state can purchase whatever is for sale in the token it controls. And it can make sure there are things available for sale by imposing a liability on you in that token you cannot avoid.
The value then depends upon how much stuff the state extracts for the public purpose in return for its token. And the belief in the coercive power that gives that process weight.
"Distilled to its roots, the Fed has been manufacturing “savings” from thin air for the better part of a decade. When the financial crisis hit in 2008, American savings were depleted, so the Fed had to step in to produce savings (to finance huge government deficits). Now the Fed is attempting to remove that “savings” at a time when:
1) The private sector is experiencing falling savings.
2) The government is likely on the precipice of expanding its dis-saving in the form of greater deficits.
...
Not to state the obvious, but all else equal, if the Fed started shedding assets at $30 billion a month (or $360 billion a year), it would exhaust the entire stock of private savings. This doesn’t allow for larger government deficits. Given the current savings level, it is mathematically impossible for the Fed to shed assets at $50 billion/month. By 2019, as we are farther out from peak net savings rates set in 2015, it is likely the stock of private savings is smaller still, and hence the ability for the Fed to shed assets at a rate of $50 billion/month is utterly impossible. Net savings have fallen in the last 2 years from a peak of just over $700 billion to the current $355 billion. Will savings halve again in the next two years? If so, there is no mathematical way in the world the Fed can shed assets at the rate it outlined yesterday."
I tend to side with the uneducated who think the FED prints money out of thin air because it is closer to the truth of the matter of where real economic value exists moreso than the anachronistic mechanics of FED policy three card monte. When all is said and done, the FED took on toxic assets it will not be able to unload into a weak economy. The only hope it has is to sell the assets at face value in exchange for inflated dollars or hope the economy booms beyond everyone's expectations in the next two years. Sure hope the latter happens because otherwise the FED has done nothing but defer the pain of 2007 into the catastrophe of 2020.
A private bank. It prints a dollar and either: (1)buys a T-Bill with it through the FOMC, or (2) lends it out through the discount window (only to big banks, not to Americans directlt), or since 2008, buys "toxic assets" with it.
How many dollars are printed is decided by unelected technocrats with no public transparency, oversight or accountability.
What the Fed also does is insure the banks because they are for some ungodly reason allowed to lend out over 10x more money than they have (to increase the money supply, econ textbooks say).
There are a lot of people who have said something between 'the Fed is a welfare system for the rich that steals from the poor' to 'it should be ended,' including Bernie Sanders, Milton Friedman, Aaron Schwartz.
In fact during the Civil War Lincoln actually ignored the banks who were all betting against him. He used the a constitutional right to print money through congress and it worked.
In academia, the groupthink around the Fed is strong. Think stronger than Challenger Disaster groupthink. And they're almost all in favor of it.
Fiat has a feudal age connotation to it. The USD is not fiat as you are able to do FX trading easily and more importantly, it's backed by the goods and services available in the United States or denominated in USD (eg. oil).
So it's value is very much perception based. Being the world's premier currency it's pretty damn safe, but if there was a widespread loss of confidence in the U.S. for whatever reason, the wealth of the U.S. relative to other countries could crater as a result.
This is why a couple years ago when the Republicans were messing with not extending the debt ceiling was playing with fire. In my opinion it was the dumbest thing I've ever seen in modern politics, and think of the competition for that statement. I imagine that the root cause of that foolishness is that some of the Republican politicians think of a country's debt like it's a household debt, when they are nothing alike.
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It's arguable that fiat power for each state similarly reflects preferences of banks, merchants and users. However, some of us doubt that money policy typically favors users.
With government fiat, forking isn't really possible, without a revolution, no matter how unhappy users are. But with Bitcoin etc, that is possible.
It's a common misconception that miners drive Bitcoin policy. In my opinion, miners are parasitic. When I first started using Bitcoin, there were virtually no professional miners. Users did all of the mining, locally. So difficulty was very low. Now, with so many professional miners, difficulty is very high. However, blocks get solved in 10 minutes on average, just as they did in the beginning.
Anyway, it's true that Bitcoin is a fiat currency. But governments aren't in control, and that's a good thing.
The truth is that the everyday user gets full control over the law of their currency simply by running a full node. Your node will reject any transactions that do not comply with the rules of your node.
The soveirgnty of bitcoin comes from knowing that the devs can't force an update upon you or the network, if you do not consent you can always reject the change.
Gold is hoarded and traded much like bitcoin, from what I've seen.
It could even be expanded to include inflationary currency in a country where hyperinflation is occurring. People will hold on to USD or some other currency as an investment because it'll be worth significantly more tomorrow than whatever currency the supermarket down the street accepts.
https://digiconomist.net/bitcoin-energy-consumption
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That's a wildly inaccurate statement. A fixed exchange rate, such as that imposed on the Chinese Yuan is a complete refutation of your claim.
Go find someone who's willing to take whatever you're trying to use instead, why should other people have to take your form of payment against their will?
I think the march of bitcoin is actually a better example of how AI is taking over the world. People in AI are fascinated by AGI - but the bitcoin ecosystem is actually a real world example of how AI will take over the world.
Specifically, the march of AI won't happen at 'edge' nodes, it won't be incremental, it won't happen by replacing humans with machines. The march of AI will start at the core, at a rethink of the fundamental infrastructure that powers an industry making it more amenable to machines and 'hostile' to most humans.
People underestimate the amount of resources required to articulate monetary policy by a central bank. Bitcoin can already do that much better than maybe 70% of the worlds central banks. India, China and US can think about banning/regulating bitcoin. But there are countries in Africa who can already do better by simply leapfrogging to bitcoin and ditching their national currencies.
Bitcoin is here to stay. And it cant be stopped.
I doubt this would do any good for them.
* Their currency would be totally exposed to 3rd parties.
* They would loose the control over the rates, which are an important tool to attract investments, if are stable and controlled well.
* AFAIK some Chinese private companies control large part of the mining network. Basically the central bank would be in private, and foreign hands.
* The slow transactions would make it totally infeasable for use in everyday life, especially as people there have limited access to necessary technologies (stable network connections all round the countries, stable electric power everywhere), so daily transactions of the ordinary people would either fall back to barters, or use some fiat paper money, eg. USDs.
I totally don't get how could you reach tis conclusion, your whole post is a SV bubble wishful thinking with some trendy bullshit, eg. software eating the FED, fed is replaced by code. Bitcoin does better than centralbanks. If some currency looses 30% of its value a single day, that is not a sign of health, and this happended the very week with bitcoin. Actually Bitcoin does its job worse than an african dictatorship's currency, if its job is being a fiat currency, which is useful for the people in daily life.
I doubt its job is that, so it may do its job well, but for this task it is unsuitable.
My post wasnt just about Bitcoin specifically, but around the entire blockchain ecosystem.
Bitcoin only has totally clear monetary policy because it's increase of the money supply is entirely predetermined: It is created at an ever decreasing rate approaching a limit.
The result of this certainty in monetary policy is a currency that is naturally deflationary (literally by definition). This makes Bitcoin perfect as digital gold but shit as a functional unit of currency. You don't want to spend an asset that will naturally appreciate in value, discouraging using it.
You could have a cryptocurrency that generally trends at the same inflation rate as regular currencies: 2-3% annual and use that to pay the miners (or just give everyone a wealth endowment through giving any current owners a 1% increase in their current wallets and use the other 1-3% for the miners) and you would have a currency that could stay price stable with out Fiat currencies instead of always increasing in price like BTC has (at least over a sufficient moving average to reduce the volatility from speculation).
Think about it: for every dollar you earn, the government can print its own one dollar to basically halve your earnings. Why would anyone want such a thing. With bitcoin, you don't need to invest in stocks/real estate and other inflation resistant things to beat inflation. You can hold your earnings in it and you are already beating inflation.
Could you elaborate how you think bitcoin monetary policy is better than 70% of world's central banks? To me, one of the most important tasks of monetary policy is to have a stable value of a currency (not against other currencies but against stuff people actually buy). And with that measure, I have difficulties identifying one single central banks that is worse than bitcoin within the last few years. (Maybe Zimbabwe or Venezuela?) But 70%? No way.
(Note that bitcoin also fundamentally lacks a mechanism for price stability, not that anyone actually owning bitcoin would that want.)
And Africa ditching national currencies for bitcoin? How do you propose that an illiterate farmer in rural nambia is going to use bitcoin? Even if you figure that out, do you think that the african governments - crappy as they may be - are that stupid that they don't figure out that instead of paying the seignorage to bunch of bitcoin nerds who currently own the currency, they can make their own fork and pocket the seignorage themselves?
Bitcoin has no future as an usable, official currency anywhere. That should be obvious.
This may be technically true, but probably won't happen anyhow. There's a reason that those currencies are terrible, and that reason is that a person or people in power benefit from the seigniorage that is the cause of the currency inflation.
None of the BTC startups, even the remittance ones, want to touch that market with a ten foot pole (Despite their slide decks shouting from the rooftops about banking the unbanked.)
Maybe it's because BTC doesn't actually solve any of their problems.
It would be trivial for them to shut down exchanges. Without that, it would hard, and expensive, to convert to fiat.
Legit businesses would not accept Bitcoin. The only uses would be black market, and I doubt they would continue using bitcoin on the darknet markets. Without the ability to easily convert to the currency of the country you live in, Bitcoin would have little to no value.
I hope those bitcoin guys won't get guns to actually execute people who are not buying.
They already leapfrogged them a decade ago with m-pesa.
Why AI takeover is always considered against humans? Why can't it co-exist with humans?
there's high potential for people gaining freedom from the west's monetary system. but i'm very pessimistic about us getting this right and not loose "control" to state and corporate powers exactly like we did with the internet.
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Fiat means "by decree" or "by authority". Fiat money is money that is decreed into existence by some authority, that is, the government. This is done through legal tender laws.
Bitcoin is not created by the enactment of some law by some authority. Fiat does not mean "by consensus", or "by mathematics". Saying code is decree, and therefor fiat, is sloppy thinking.
Bitcoin may have much in common with fiat, but that does not mean that it is fiat. It is, by definition, not fiat.
What gives Bitcoin value is not government decree, but its utility [1]. And that is somewhat paradoxical, because the more people hoard it the less utility it has. And the more its used to buy and sell goods, the more utility it has, and the more value it has.
[1] https://fee.org/articles/what-gave-bitcoin-its-value/
It's -- you know -- an element of literary style.
If you don't believe it just check out the cases that were brought to light. You will find that they are very obvious and not super secret. You will find that someone in a similar position but different company/government actually profits from this "discovery". And you will find that not all cases get punished, just this one case. (think 2008 here, where they literally jailed a single banker and that was it)
Hidden in plain sight, ignored by people who want or need you to succeed. That's how this game works.
An example would be Lebanon. Everyone except US citizens gets pretty good banking privacy protections. Due to US pressure, Lebanon carved out an exception to those protections, just for US citizens. There aren't exceptions for any other countries, as far as I know.
As they are high net worth families, getting citizenship in a new country won't be difficult.
Also, it seems like a bad idea to stash much of your wealth in a system is so vulnerable to theft. All it takes is for someone to have a momentary lapse in security or put a decimal in the wrong place or some other human error and then all that wealth is gone forever.
....and what prompted the conversation : ) ?
The problem is that crypto can be good for a % of your illegal money, since it's relatively unproven. Any exchange that doesn't share the info will be taken down ala BTC-E (my bet is that IRS /FBI has their client list and transaction history already) so it's very very hard to spend /cash out.
If it gets our hand, of course then govts we'll declare war on cryptocurrencies
I find the opposite: people who don't "get" Bitcoin tend to not know what makes money actually money, and don't know how the current monetary system works (eg. still believe dollars are backed by gold).
I'm sure that has enough truth in it. But you can characterize bankers in a similarly negative way -- particularly in light of recent economic engineering. But we all buy in to the concept of money (excuse the pun).
Sure, but they tend to know a lot about currency.
Many people don't know that central bankers literally, not figuratively, mean CREATE money out of nothing.
As long as you can separate "money" from its representation, there is nothing particularly problematic about some people being able to create money, at least some of the time. In fact it is necessary to provide money with liquidity as the economy grows and money is needed for more and more things (liquidity problems have triggered or worsened economic crises several times in history, especially when countries were trying to base their money on weights of metals).
No, this is not true.
Central banks do 'create' money, but they trade it on the market for real assets.
The Fed creates dollars and exchanges them for an equal amount of US Tbills (bought at market rates). $1 created = $1 in Tbills on their balance sheet.
They're not just creating money and keeping it, or giving it away.
The practice of 'fractional lending' by retail/commercial banks amplifies this, but as far as central banks go - every dollar they 'create' is essentially backed by an asset that they keep on the books for that dollar.
The idea is to manage how much currency is in circulation at any given time, so that inflation (and employment) hover at certain target.
If politicians were 'printing money' to pay national debts, or buy stuff or whatever - that would be straight forward dilution.
What the Fed does is not dilution, and it's not a bad thing, it's a good thing.
Same for ECB.
At the summit of the tree the assets are just 'other assets'. An accounting fiction.
The state can purchase whatever is for sale in the token it controls. And it can make sure there are things available for sale by imposing a liability on you in that token you cannot avoid.
The value then depends upon how much stuff the state extracts for the public purpose in return for its token. And the belief in the coercive power that gives that process weight.
1) The private sector is experiencing falling savings. 2) The government is likely on the precipice of expanding its dis-saving in the form of greater deficits.
...
Not to state the obvious, but all else equal, if the Fed started shedding assets at $30 billion a month (or $360 billion a year), it would exhaust the entire stock of private savings. This doesn’t allow for larger government deficits. Given the current savings level, it is mathematically impossible for the Fed to shed assets at $50 billion/month. By 2019, as we are farther out from peak net savings rates set in 2015, it is likely the stock of private savings is smaller still, and hence the ability for the Fed to shed assets at a rate of $50 billion/month is utterly impossible. Net savings have fallen in the last 2 years from a peak of just over $700 billion to the current $355 billion. Will savings halve again in the next two years? If so, there is no mathematical way in the world the Fed can shed assets at the rate it outlined yesterday."
Source: http://blog.knowledgeleaderscapital.com/?p=13520
I tend to side with the uneducated who think the FED prints money out of thin air because it is closer to the truth of the matter of where real economic value exists moreso than the anachronistic mechanics of FED policy three card monte. When all is said and done, the FED took on toxic assets it will not be able to unload into a weak economy. The only hope it has is to sell the assets at face value in exchange for inflated dollars or hope the economy booms beyond everyone's expectations in the next two years. Sure hope the latter happens because otherwise the FED has done nothing but defer the pain of 2007 into the catastrophe of 2020.
A private bank. It prints a dollar and either: (1)buys a T-Bill with it through the FOMC, or (2) lends it out through the discount window (only to big banks, not to Americans directlt), or since 2008, buys "toxic assets" with it.
How many dollars are printed is decided by unelected technocrats with no public transparency, oversight or accountability.
What the Fed also does is insure the banks because they are for some ungodly reason allowed to lend out over 10x more money than they have (to increase the money supply, econ textbooks say).
There are a lot of people who have said something between 'the Fed is a welfare system for the rich that steals from the poor' to 'it should be ended,' including Bernie Sanders, Milton Friedman, Aaron Schwartz.
In fact during the Civil War Lincoln actually ignored the banks who were all betting against him. He used the a constitutional right to print money through congress and it worked.
In academia, the groupthink around the Fed is strong. Think stronger than Challenger Disaster groupthink. And they're almost all in favor of it.
Exactly what the parent said.
The fact it is used to buy TBills is irrelevant: the Fed creates money out of thin air. Period.
So it's value is very much perception based. Being the world's premier currency it's pretty damn safe, but if there was a widespread loss of confidence in the U.S. for whatever reason, the wealth of the U.S. relative to other countries could crater as a result.
This is why a couple years ago when the Republicans were messing with not extending the debt ceiling was playing with fire. In my opinion it was the dumbest thing I've ever seen in modern politics, and think of the competition for that statement. I imagine that the root cause of that foolishness is that some of the Republican politicians think of a country's debt like it's a household debt, when they are nothing alike.