shares crash worldwide

Generali

dryhat wrote: »

Whereas banks can alter the money supply and even the entries on their balance sheets, mathematical algorythms built into the protocol prevent this from happening with Bitcoin.

So there'll be no debt or savings with Bitcoin then.

Banks can't alter the entries on their balance sheet. The way they create money is through fractional reserve banking (FRB). If Bitcoin is going to have FRB then the supply of them will rise. If Bitcoin isn't going to have FRB then what?

Without debt financing there can be no trade in meaningful amounts. In fact most of the economy ceases to exist. That doesn't sound progressive so much as a return to the bronze age.

dryhat wrote: »

Bitcoin is not a FIAT currency - nobody is forced to use it.

Fiat money means that it exists by diktat. In this case the diktat isn't from a government but it is by diktat nonetheless. Fiat money is as opposed to in specie money. The value of in specie money is derived from its physical existence.

globalds

Generali wrote: »

So there'll be no debt or savings with Bitcoin then.

Banks can't alter the entries on their balance sheet. The way they create money is through fractional reserve banking (FRB). If Bitcoin is going to have FRB then the supply of them will rise. If Bitcoin isn't going to have FRB then what?

Without debt financing there can be no trade in meaningful amounts. In fact most of the economy ceases to exist. That doesn't sound progressive so much as a return to the bronze age.



Fiat money means that it exists by diktat. In this case the diktat isn't from a government but it is by diktat nonetheless. Fiat money is as opposed to in specie money. The value of in specie money is derived from its physical existence.

So we never had debt or savings when the pound was pegged to Gold ?
Bitcoin is similar to gold in that respect .
I doubt many governments will willingly take on Bitcoin as there currency as it stops them doing what they always seem to do .
But we have a pound in the UK and we can buy and sell gold in the uk ..you could even pay for something with Gold as long as both parties agreed ..Seems you have a deeper rub with bitcoins ...And yet are fairly comfortable with the opposite notion ...Having a currency in circulation that has no restrictions on some of the fundamentals that would render it worthless ?

globalds

I have to add that my simple view of bitcoins is that it solves the one problem you have with trying to use gold as a currency
How to keep it safely and to transport it without creating an unacceptable risk and if you intend to pay with it ..how you safely get it to the other person and then how they secure it .

jamesd

dryhat wrote: »

I hope that answers everything.

How many streets of houses per bitcoin do you think the exchange rate between bitcoin and physical goods would be if it became a widely used currency? There are rather more than just 21 million houses on the planet.

Bitcoin seems to have been designed for currency speculators, with designed in increases in value per bitcoin.

globalds

jamesd wrote: »

How many streets of houses per bitcoin do you think the exchange rate between bitcoin and physical goods would be if it became a widely used currency? There are rather more than just 21 million houses on the planet.

Bitcoin seems to have been designed for currency speculators, with designed in increases in value per bitcoin.

How many kilos of gold per house or houses per kilo of gold ?
,one bitcoin might represent one kilo or one gram of gold , it doesn't matter if a house is worth a kilo of gold or a fraction of a kilo....As long as both parties agree on how much Gold or bitcoins to swap for the house.

So would you say Gold was designed by speculators too ?

Generali

globalds wrote: »

So we never had debt or savings when the pound was pegged to Gold ?
Bitcoin is similar to gold in that respect .
I doubt many governments will willingly take on Bitcoin as there currency as it stops them doing what they always seem to do .
But we have a pound in the UK and we can buy and sell gold in the uk ..you could even pay for something with Gold as long as both parties agreed ..Seems you have a deeper rub with bitcoins ...And yet are fairly comfortable with the opposite notion ...Having a currency in circulation that has no restrictions on some of the fundamentals that would render it worthless ?

Hang on a sec, now you're conflating different things.

Under the Gold Standard there was FRB: each ounce of gol had multiple claims on it. Indeed that's what led to its ultimate collapse in 1971. The French wanted 'their' gold out of the system and there was effectively a bank run, just the same as happened with Northern Rock really.

Debt has acted as money since at least the Roman times so really if we are going to use Bitcoins solely as a currency with no FRB as seems to be implied in dryhat's posts then really we are looking at a deflationary world if GDP is going to continue to rise as if the money supply is constrained but the number of goods and services rise then the goods and services need to cost less each. This is what happened in the west in the 1870s: post Civil War USA and also Germany and France expanded their economies rapidly and the money supply couldn't keep up. That led to deflation in the early part of the decade and a vicious depression in the second part.

I still fail to see any advantage to Bitcoin over a fiat currency issued by a Government. In fact in many respects it combines the worst aspects of in specie and fiat currencies being at the same time constrained without having the (mostly psychological) security of having something tangible as money.

The sole advantage to Bitcoin is that it operates in a shadow banking system that has no AML controls. No AML controls make it very good for people who need to get around AML, e.g. drug dealers.

Ultimately, the US and EU will get their act together and put Bitcoin on the suspect list for money laundering and the gig will be up.

If Bitcoin does manage to have all the advantages and none of the disadvantages of in specie money (highly unlikely IMHO but that appears to be your position) then it is doomed to failure due to Say's Law: bad money drives out good. Bitcoin would become purely a store of wealth, rarely if ever changing hands. At that point it stops performing one of the chief functions of money and stops being money.

HTH.

jamesd

No AML also makes it good for those who dislike AML, on grounds like a simple desire for banking privacy, without any criminal intent having to be involved. Contrast with say government agencies apparently tracking every credit card transaction for future use.

globalds, I just wonder what the plan to give change is when a single bitcoin might be worth a street of houses if it ever became popular. Seems that it would need a massive reduction in the value of the currency unit to achieve that, unless we want to talk in micro-bitcoins for buying food.

No, I wouldn't say that gold was designed for speculators. Gold mine production is fairly stable and quite well matched to demand. Bitcoin has a designed in halving of production every four years, nicely short for those who want to make speculative profits based on a lack of money supply.

Generali

jamesd wrote: »

No AML also makes it good for those who dislike AML, on grounds like a simple desire for banking privacy, without any criminal intent having to be involved. Contrast with say government agencies apparently tracking every credit card transaction for future use.

Perfectly true.

However, the vast majority of people looking to avoid AML measures are crooks IMHO. After all, you can always simply use cash for everything if you don't want your transactions tracked. If you aren't laundering money then you won't encounter a problem, even if you buy a house for cash.

padington

Sounds like a great time to short the FTSE then ?

chucknorris

padington wrote: »

Sounds like a great time to short the FTSE then ?

Obviously you have to do what you think represents best value for you, but right now I think investing more in ftse trackers represents best value for me. Here is my logic:

1. With low savings rates my worst savings account is only paying 2.7% (1.52% net) but the tracker I invest in historically pays about 2.8% in dividend income, so all things being equal there is no opportunity cost (no loss of interest).

2. With careful management I can avoid paying capital gains tax, so any gain is tax free.

3. My portfolio was short of shares anyway (and still is) but I have recently increased the shares percentage of my portfolio from 7.5% to 10.4% (around 20%-30% is my eventual target).

4. I decide when (if) I sell so given that there is no opportunity cost I can simply wait to sell when the market is high, so I am in control (although I would probably elect to stay in the market rather than take profit). Whereas shorting the market will be done with a fixed date, in other words simply a gamble based on a hunch with no control.