What are your thoughts on BitCoin?

[Lexicus]

Remember, not all modern economies use 'state money'. The entirety of the EU springs to mind,

The Euro is still 'state money' in the sense in which I use the term.

At best, you can think of a small handful of countries that have maintained their inflation at a reasonable oscillation around 2% for the entirety of my adult life.

If this is your definition of 'trustworthy' then no monetary system in human history has ever been trustworthy.

I'm not suggesting that there's a better alternative to fiat in developed economies.

This is what I'm talking about. I don't understand why you would say "only as trustworthy as the government(s)" when there really are no institutions more trustworthy, in this sense, than governments.

But your fiat holdings are speculating twice, once on the underlying assets that is protected by debt (and taxes) and the second on the actual trustworthiness of the issuer.

And again portraying this as some unique issue with fiat currencies is just plain wrong. Using any money to make any kind of investment involves 'speculating on the actual trustworthiness of the issuer.' There is no way to avoid that problem.

 

[El_Machinae]

This is what I'm talking about. I don't understand why you would say "only as trustworthy as the government(s)" when there really are no institutions more trustworthy, in this sense, than governments.

More trustworthy governments? A society that would be loathe to seize your property outright can easily be a country that will inflate away your investments. It's a layer of speculation. Hell our countries used inflation to rip off the purchasers of War Bonds during WWII. Despite the ability to tax giving value to fiat, they still couldn't avoid the temptation.

When I buys bonds from a company, I am also betting on all their future regulatory and taxation environments and also the relative growth of their economy compared to mine. As a third layer, I then have to worry about their government deciding to inflate or not. In that last instance, I am not a price-discoverer or part of a market force, I am literally at the whim of a small handful of people who make up their mind later.

It's a layer of complication, and much more beholden to a roomful of people. Right now, the value of any CAD I own is a mishy mashy mush of Canadian productivity and the promise of a handful of people to lower its value at a rate of 2% per year.

The fiat currency is better for an economy in nearly all ways, but it's not only backed by the courts (as a fixed currency would be) but by the second layer of confusion of future decisions.

If you're willing to count the Euro as fixed money, then the relative trustworthiness of 'state money' goes even lower. Greece bungled their use of it, and then the EU gave Germany banks a ton of money in consolation. It's the complete opposition of how bankruptcies create value in our economies.

 

[Lexicus]

A society that would be loathe to seize your property outright can easily be a country that will inflate away your investments.

It's funny because you're basically saying it's a problem that you're unsure whether the government might undermine your ability to exploit the scarcity of capital to extort people into paying you for simply owning things. I don't see this as a problem.

As a third layer, I then have to worry about their government deciding to inflate or not. In that last instance, I am not a price-discoverer or part of a market force, I am literally at the whim of a small handful of people who make up their mind later.

I still don't see how this is somehow worse than being at the whim of private bankers or gold.

If you're willing to count the Euro as fixed money, then the relative trustworthiness of 'state money' goes even lower. Greece bungled their use of it, and then the EU gave Germany banks a ton of money in consolation. It's the complete opposition of how bankruptcies create value in our economies.

Well, not really. The whole problem with the Euro is that the states concerned have ceded their sovereignty to an organization (ECB) that acts like a private consortium of bankers. This is also a very poor description of the Greek crisis and how it interacted with the wider European crisis (Greece is a bungler but primarily a victim of fraud). Finally I must ask - trustworthiness relative to what? Relative to bank money? Relative to temple money? Relative to cowrie shells?

 

[El_Machinae]

I still don't see how this is somehow worse than being at the whim of private bankers or gold.

It's a smaller group of decision makers, and is much more dependent upon trust than mere market forces.

Seriously though, a small handful of people get to decide the future value of your bond holdings. Waaaay upthread, you mentioned the ability to tax as backing the value of fiat. I then (inevitably) mention that debt also backs fiat. And then, on top of this, a small group of people decide its value too.

Meanwhile, with a backed currency, the value is retained by both the underlying asset AND debt and taxes. Now, as we saw with Soros, you can also get situations where a handful of people can also change the value of a currency very severely. Unsurprisingly, billionaires more powerful than governments are bad for people.

It's funny because you're basically saying it's a problem that you're unsure whether the government might undermine your ability to exploit the scarcity of capital to extort people into paying you for simply owning things. I don't see this as a problem.

This is not the issue under discussion. Point to where I say that fiat is a 'problem'. What I am contesting is that it's as 'real' as the government's ability to tax and enforce its courts.

 

[Lexicus]

It's a smaller group of decision makers,

Not necessarily. Bank money can very easily involve a smaller group of decision makers. With the added bonus that they're not even nominally accountable to anyone else.

I then (inevitably) mention that debt also backs fiat.

That's not really true, though, because the value of that debt is itself dependent on the ability of the government to effectively enforce the payment of the tax liabilities it imposes.

Meanwhile, with a backed currency, the value is retained by both the underlying asset AND debt and taxes.

Using the historical case of the gold standard, this is almost the exact opposite of the truth. "Backing" the currency with some commodity like gold simply introduces a new source of instability. The gold standard was quite a lot more unstable than the current fiat regime.

 

[El_Machinae]

That's not really true, though, because the value of that debt is itself dependent on the ability of the government to effectively enforce the payment of the tax liabilities it imposes.

No, it is true. A currency can easily maintain its value without it being taxed, once its value has started. Taxing merely allows surplus productivity to be earned by those who accept government dollars as payment. In modern societies, we have very little regressive taxation denominated in currency alone (property taxes, maybe?). People work for dollars because they owe dollars and all contracts are denominated in dollars. You can either give up your house or perform the work required to give the back the USD your contract demands. Or, in other words, dollars are the least valuable thing you can discharge a debt with and thus its latent value.

Bitcoin currently has value because various governments say "we will protect contracts involving bitcoins", even though it's not taxed. A bond denominated in bitcoin gains its value solely from that. No taxes.

It doesn't matter how much fiat they tax me in if the underlying currency isn't backed by debt. The Canadian government could say to me "You owe me 10% of all fauxcoins you earned last year and next year" and see me shrug in apathy. I'd continue to trade using CAD as long as the courts protected CAD contracts.

Fiat started in taxes, but that was literally the libertarian boogieman, taxes collected at the point of a spear. If the Canadian government said to me "you have to give me 100 fauxcoins at the end of the year, or we will jail you", then suddenly I am less apathetic. They can then literally pay government workers in fauxcoins, because those workers know that I will hustle to get the fauxcoins from them. Now, governments don't need to tax in order to get spending. They can literally get spending merely by devaluing other people's debt paper, but that only works if the spending is a surprise devaluation OR if it's limited to the free production bump you get by converting idle resources into active resources with fiat spending.

 

[Birdjaguar]

El Mac, what are your goals?

 

[El_Machinae]

El Mac, what are your goals?

Regarding what?

 

[Birdjaguar]

Investments; but I see in another thread you said you were a value investor looking for dividend paying stocks. So i assume crypto currency is just a sideline interest.

 

[El_Machinae]

Investments; but I see in another thread you said you were a value investor looking for dividend paying stocks. So i assume crypto currency is just a sideline interest.

Crypto currency is only an interest in that it's interesting, I looked into bitcoin when all the economics blogs started talking about it and decided that it was bunk.. I perceive negative underlying value for bitcoin as a savings vehicle. I see cryptocurrency as a foolish competitor to real currencies. I have better inflation hedges. I see negative societal value in purchasing it as a speculation. I have no doubt there's a market for it, and that there will be a winner that some speculators will choose correctly (in retrospect), but I think it's like children in the 70s buying hockey cards.

In real economic terms, it's not an investment. As a savings vehicle, I don't see it as valuable compared to other instruments I can buy.

 

[Archbob]

SEC hearing seemed pretty Neutral as Cryptos go. Bullish on Blockchain but wants more regulation to rein in cryptos.

 

[Samson]

Does anyone here know how to do an ICO? I kind of guess you can just take someones code, like etherium, put in your own source keys and tie it to whatever digital good you are selling. Then you just have to convince people that it is worth something.

 

[Zardnaar]

I like the Ron Paul Fun Bucks name lol.

 

[Hygro]

Does anyone here know how to do an ICO? I kind of guess you can just take someones code, like etherium, put in your own source keys and tie it to whatever digital good you are selling. Then you just have to convince people that it is worth something.

I've been trying to brainstorm reasons for your concluding sentence, been asking friends on occasion... other than as a collectable or by risking your company by tying it to your product I haven't come up with one.

I guess what I'm saying is, I second this query.

 

[Archbob]

I like the Ron Paul Fun Bucks name lol.

I'm doing a Ron Paul Fun Bucks Coin ICO soon, don't miss it.

 

[Narz]

My friend is trying to get me to buy BTCz, he has one million of them (he sent me 2,000), worth about 3/4 of a penny each.

 

[Archbob]

I got a lot of Micro Cryptos. ECC coin is my favorite, also have a ton of DOGE.

 

[Narz]

Crypto recovery continuing

 

[Archbob]

So,
There 2 pieces of news that could effect this is different directions.

1. Arizona just passed a bill from committee(now in house) that could allow paying AZ taxes with BTC
2. G20 Summit calls for more regulation of Crypto, not sure which one of these is going to effect Crypto more.
3. Daily Express is a tabloid, not real news.

 

[Kozmos]

I'd be more concerned about ECB TIPS system rollout in November.