Bitcoins

JohnRo wrote: »

All fiat currencies are pyramid schemes.

i don't think so.

pyramid schemes involve new members (the lowest level of the pyramid) who pay to join, with that money being used to pay the higher levels, with the lion's share going to those near the apex. the hope for new members is that they will make money by advancing up the pyramid, which means that more ppl will have to join after them, forming lower still layers. each layer must contain more members than the previous layer. that implies that exponential growth in membership is required for the scheme to keep going. and therefore the scheme is bound to collapse eventually when no new members can be found - though this can take a number of years.

so, fiat currencies ... you could say that there are 3 layers involved in a fiat currency:

1. central bank / government treasury (since they are not genuinely independent, just 2 arms of the State - unless we're thinking about the eurozone, so let's not)

2. commercial banks

3. everybody else who uses the currency (i.e. people + all businesses other than banks)

well, for a start there is no hope held out that anybody can advance to a higher level in the pyramid.

and you don't pay to join the lowest layer.

the upper layers do profit from their position, however, because they can create money "out of thin air". at least in theory, the State is in the best position to profit, but a lot of the profit is actually captured by the commercial banks (so you might say that i have the upper 2 layers the wrong way round ).

you might argue that it is typical of a pyramid scheme that the upper layers can profit despite not producing anything of value, that their profits must come from somewhere, and that therefore the rest of us must be paying in some way. to which i'd reply that the whole system of having a working currency which everybody uses is actually of great value: it facilitates transactions, and is a stable (at least in the short term) store of value. it is not a simply - or at all - a process of using money taken from the lower layers of the scheme to pay the upper layers.

and there is no requirement for exponential growth. a fiat currency can continue to operate despite a flat or falling population. there is no upper limit on how long a fiat currency can last.

nice slow conversation we're having here ...

JohnRo wrote: »

The fiat pyramid is evident in the credit hierarchy, access and cost, for those beneath the omnipotent creators.
People with little or no access to credit, which is most, are the slaves that prop up the whole crooked enterprise, forced to exchange their labour for increasingly worthless tickets and it's the increasingly worthless aspect that makes it a pyramid.

there are 2 distinct things that have been different since the 1970s:

1) the complete abandonment of the gold standard, i.e. moving to purely credit-based money; and

2) the inflation, over a period of decades, of a number of credit bubbles, many peaking around the time of the GFC (though japan was far earlier, and china hasn't quite got there yet), since when the world economy has been suffering from debt deflation - i.e. the bad debts haven't been written down, so the productive economy is being held back by the attempt to pay ever-increasing amounts "owed" to the financial sector.

now, those 2 things are related. (2) could not have happened without (1).

but it is perfectly plausible to reject (2) without rejecting (1). bad debts need to be written down, and the predatory finance sector transformed into a public utility, which lends for productive investment, not to inflate asset bubbles (and which doesn't defraud its customers, fix markets, or assist its customers to evade tax and launder the proceeds of other crimes - it's difficult to mention everything wrong with the finance sector in a few words ). but none of that implies that we should go back to commodity-based money - whether that commodity be gold, silver, or (on topic!) bitcoin.

IMHO, the gold standard was a complete disaster. credit-based money was a definite improvement. unlike de-regulating the finance sector. let's regulate it properly, but keep "fiat" money.

The only real need for fiat is so that governments can spend on themselves and fight wars they can't afford with money they don't have.

historically, wars were the main thing governments spent money on. and that may still be the case in some countries.

but not in the UK now: far more is spent on the reasonable things (viz. transfer payments to the old, sick, and unemployed, and useful public services) than on the unreasonable things (viz. a lot of military spending, bulk spying on the general population, and targeted spying on / infiltration of various non-violent left-wing organizations). we could argue about precisely which bits of spending are or aren't reasonable, but total military spending (at least a small part of which is reasonable) is way under 10% of government expenditure, and the other dubious things are much cheaper than that.

so basically, the "magic" feature, that the UK government can spend money it doesn't have - or, more accurately, spend money into existence - is, in terms of the sheer numbers, mostly used for good.

All of human history suggests otherwise. It's only about 40 years since the last official reset. Just because a bank ticket is given the same name it's always had, doesn't make it the same thing.

nothing last forever. but is there an arithmetic reason why our money system can't go on beyond a certain point - in the same way that the theoretical limit of a ponzi scheme is when everybody in the world has already joined it?

for fiat money, no. for credit bubbles, yes.

for a longer perspective on money, david graeber's book, "debt: the first 5000 years", is enlightening. he describes alternating periods of credit-based and bullion-based money. the oldest records of money are from ancient sumerian civilization, around 3500 BC - and they used credit-based money. bullion-based money was dominant in 2 periods, 800 BC - AD 600, and 1450-1971; with credit-based money dominant before, between, and after those periods. which suggests we are not very far into a new era - and who knows what shape it will take? but the current credit bubbles may be an early teething trouble, rather than a permanent feature.

Only since the last major reset in 1971, disguised as decimalisation, the value of the 'pound' has been reduced to somewhere between 8% and 3% of the purchasing power it held then, depending which inflation measure and purchase you compare. Confidence trick.

straw man. you're don't keep money under than mattress. in a savings account, the interest would roughly match inflation.

fiat is a confidence trick. but there's nothing wrong with that.

In other news Bitstamp has just become the first EU licenced tulip bulb exchange.

i'm sure there was a use for tulips, too