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Online Cash Bitcoin could Challenge Governments, Banks

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Re: Online Cash Bitcoin could Challenge Governments, Banks

#161

Post by reitzensteinm »

reitzensteinm wrote: post #152
bonzoesc wrote: post #10

Earlier quoted context omitted.

It's possible to run a Bitcoin laundromat; you control addresses A and D, laundromat controls B and C. Send money from A to B, receive from C to D. As long as the laundromat doesn't recycle addresses and moves a lot of cheddar, it'll be difficult to establish a linkage.

Actually, it sounds pretty easy to programatically establish that linkage if B & C are only used once. Just discount nodes that only forwarded money in their life. You could make lots of noise by having hundreds or thousands or tens of thousands of nodes trading with each other - but automated analysis could still figure out what they're doing. To effectively launder money you'd have to actually put it through active…

Oops, I misunderstood the parent comment, and the edit period has passed.

Re: Online Cash Bitcoin could Challenge Governments, Banks

#162

Post by joe_the_user »

richcollins wrote: post #153
joe_the_user wrote: post #131

Earlier quoted context omitted.

The problem is that since an alternative currency is still pretty purely hypothetical, we don't know with any certainty that it wouldn't be subject to similar abuses. Moreover, aside from inflation, the other abuses you list are essentially abuses of power and if governments maintain power - their official monopoly of force and violence, they will continue to be able to engage in these other actions. EI, I don't thin…

Why don't you include inflation in that list?

Inflation is pretty much directly based on the control of the currency.

While I don't necessarily advocate a society using gold-money, it's an example of a situation where the state couldn't directly control the currency. A state in such a society could still tax and arbitrarily confiscate money but it couldn't create inflation (well, under normal circumstances...).

Re: Online Cash Bitcoin could Challenge Governments, Banks

#163

Post by nerfhammer »

danenania wrote: post #156
ZitchDog wrote: post #97

Earlier quoted context omitted.

I fundamentally disagree. The purpose of currency is to facilitate efficient trade. It is dangerous when currency is seen as an appreciating asset (deflation) as this will encourage hoarding (speculation) and discourage spending and investing.

These are well-worn fallacies. First, falling prices do not cause hoarding--demand for goods will increase if anything. Mild deflation is actually the sign of a healthy economy, competition, and technological innovation. Just look at the consumer electronics industry. Why do people buy iPads when they know a cheaper and better one will come along in the next couple years? According to your theory, wouldn't they just…

Deflation is almost invariably a sign of economic distress. This can easily be observed historically.

By the way the term I think you mean is "quantity demanded" with respect to price, "demand" is invariant to price.

Under deflation average income decreases. It's not like everyone is suddenly richer. Your employer gets less money, and so has to pay you less, or lay off a portion of their workforce. The price of labor is a price like any other.

Assuming a fixed money supply, hoarding currency will cause deflation. Hoarding currency takes money out of the money supply. Saving by making investments is different; the money is still participating in the economy. Deflation discourages investment in useful activity. If you can earn a 5% rate of return just for already having money, why bother with a investment could return 5% or less?

Re: Online Cash Bitcoin could Challenge Governments, Banks

#164

Post by vrotaru »

quanticle wrote: post #120
vrotaru wrote: post #91

Earlier quoted context omitted.

> There has never had been such a thing a deflationary spiral , though.

Yes there has. The Great Depression was a deflationary spiral. Bank failures caused people to hoard currency. This hoarding led to decreased investment and economic activity. The decrease in economic activity led people to lose jobs, which caused them to hoard even more money. In addition, the decrease in the money supply greatly increased the value of debts. You were getting paid less, but the your mortgage payment…

> The Great Depression was a deflationary spiral.

No, it wasn't.

> Bank failures...

Are a big topic, actually, but this one had nothing to do with a deflationary spiral. Hint: A one time deflationary event is not the same as deflationary spiral. Previous deflationary event of similar magnitude happened 1920-1921. The "Forgotten Depression", so to speak.

Of course the FR (fractional reserve) banks are inherently instable and that's a feature of the system. If you want the ability to inflate the money supply at bankers' will and whim, don't act surprised when it (the money supply) collapses to more a sustainable level.

> .. caused people to hoard currency.

Source? Genuinely curious.

> This hoarding led to decreased investment and economic activity.

There was decreased investment and economic activity. But because of hoarding? It's too self-serving argument as such. There were at least 3 other major causes as well, and I can name them.

> the decrease in the money supply greatly increased the value of debts

Sure. So it means that the creditors are wealthier and can afford themselves to spend and invest more. Not what I'd call an economic horror.

Anyway, the most vivid evocation of horrors of a deflationary event is not a example of a deflationary spiral, and that's exactly what I was asking for.

Sure, if for whatever reasons the amount of money in an economy decreases then the prices had to adjust and it can be painful but.. what are options? But what this has to do with a deflationary spiral?

Re: Online Cash Bitcoin could Challenge Governments, Banks

#165

Post by nerfhammer »

mike_esspe wrote: post #144
quanticle wrote: post #120

Earlier quoted context omitted.

Yes there has. The Great Depression was a deflationary spiral. Bank failures caused people to hoard currency. This hoarding led to decreased investment and economic activity. The decrease in economic activity led people to lose jobs, which caused them to hoard even more money. In addition, the decrease in the money supply greatly increased the value of debts. You were getting paid less, but the your mortgage payment…

Great Depression was in the epoch of fiat money and most likely was a result of inflating money supply during 1920s ( http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression#... ). Do you know about a deflationary spiral when gold was the money? (Almost all the history before 20th century).

The US dollar was backed by gold until 1933. The deflationary contraction occurred between 1929 and 1933. So, there you go.

Re: Online Cash Bitcoin could Challenge Governments, Banks

#166

Post by artsrc »

danenania wrote: post #156
ZitchDog wrote: post #97

Earlier quoted context omitted.

I fundamentally disagree. The purpose of currency is to facilitate efficient trade. It is dangerous when currency is seen as an appreciating asset (deflation) as this will encourage hoarding (speculation) and discourage spending and investing.

These are well-worn fallacies. First, falling prices do not cause hoarding--demand for goods will increase if anything. Mild deflation is actually the sign of a healthy economy, competition, and technological innovation. Just look at the consumer electronics industry. Why do people buy iPads when they know a cheaper and better one will come along in the next couple years? According to your theory, wouldn't they just…

Productive investment means spending cash on something, like property, R&D, or plant and equipment. I don't see how this is the same as hoarding cash.

There is a psychology that iPads, and to an even greater extent iPhones, are a short life time product. So their price in a couple of years does not matter. Buying one now will not prevent you from buying one at the cheaper price in a couple of years as well.

Re: Online Cash Bitcoin could Challenge Governments, Banks

#167

Post by indrax »

joe_the_user wrote: post #131
sage_joch wrote: post #45

I think the main takeaway is that governments are making a strong case for an alternative, decentralized currency: * preventing transactions they don't agree with * inflating savings away * freezing bank accounts of adversaries * seizing cash at security checkpoints

The problem is that since an alternative currency is still pretty purely hypothetical, we don't know with any certainty that it wouldn't be subject to similar abuses. Moreover, aside from inflation, the other abuses you list are essentially abuses of power and if governments maintain power - their official monopoly of force and violence, they will continue to be able to engage in these other actions. EI, I don't thin…

With a Truecrypt partition you could show them your insignificant bitcoin wallet, and only go back to your regular bitcoin wallet after they leave.

True this would currently require a lot more security consciousness than most people have, but conceivably all the necessary features could be built into a bitcoin client.

Re: Online Cash Bitcoin could Challenge Governments, Banks

#168

Post by vrotaru »

nerfhammer wrote: post #165
mike_esspe wrote: post #144

Earlier quoted context omitted.

Great Depression was in the epoch of fiat money and most likely was a result of inflating money supply during 1920s ( http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression#... ). Do you know about a deflationary spiral when gold was the money? (Almost all the history before 20th century).

The US dollar was backed by gold until 1933. The deflationary contraction occurred between 1929 and 1933. So, there you go.

> The deflationary contraction occurred between 1929 and 1933.

Sorry, but are you serious? For starters:

"By keeping industrial wages too high, Hoover sharply depressed employment beyond where it otherwise would have been, and that act drove down the overall gross national product," Ohanian said. "His policy was the single most important event in precipitating the Great Depression."

http://newsroom.ucla.edu/portal/ucla/pandering-to-labor-caus...

Re: Online Cash Bitcoin could Challenge Governments, Banks

#169

Post by originalgeek »

pyre wrote: post #76
originalgeek wrote: post #62

> Because Bitcoin is an open-source project, and because the database exists only in the distributed peer-to-peer network created by its users, there is no Bitcoin company to raid, subpoena or shut down. Which will leave only Bitcoin users to raid, subpoena and shut down.

And that worked so well for copyright piracy! I'm glad we live in a world without pirated music and movies!

Hauling people away in handcuffs is a much more potent deterrent than randomly shaking people down for a few grand.

Re: Online Cash Bitcoin could Challenge Governments, Banks

#170

Post by mike_esspe »

nerfhammer wrote: post #165
mike_esspe wrote: post #144

Earlier quoted context omitted.

Great Depression was in the epoch of fiat money and most likely was a result of inflating money supply during 1920s ( http://en.wikipedia.org/wiki/Causes_of_the_Great_Depression#... ). Do you know about a deflationary spiral when gold was the money? (Almost all the history before 20th century).

The US dollar was backed by gold until 1933. The deflationary contraction occurred between 1929 and 1933. So, there you go.

There was fractional reserve banking (http://en.wikipedia.org/wiki/Fractional-reserve_banking). Banks could lent more dollars, than they had in reserves.

Money supply (M2) was expanding with great rate till the 1928.

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