M-Pesa: The Beginning of the End for the Black Economy

dryhat

Generali wrote: »

I suspect so and I don't truly understand it.

I've followed the FT Alphaville posts about BTC and Issy is really good on monetary theory. She's pretty down on BTC and, as far as I understand her posts, I can see why.

But she could be wrong of course. It happens to us all. Without a proper understanding I do have an instinctive distrust of private fiat money.

Private (or public) money has always needed a central authority to issue the money. Not any more.

But, as I said, Bitcoin as a brand new technology is about more than money and payments. It is still early days, but the potential for disruption of many sectors of the economy is huge.
The Bitcoin landscape is continually evolving and even compared to 12 months ago it has changed massively. If you compare it to the development of the internet we are in about 1997.

As an aside, I have never heard of the person you refer to, but I'm guessing she passes as some kind "economic expert" - which is even less reason to take any notice of her.
Many so-called experts are going to look very foolish in a few years when you look back at their views on Bitcoin.

wotsthat

tomterm8 wrote: »

You're underestimating the intelligence of the criminal fraternity. A basic rule of nature is that if the government makes it impossible to commit crimes via the standard currency, people will invent new currencies.

Someone paying cash to evade VAT doesn't really see themselves as being part of the criminal fraternity. I'm sure most of these buyers & sellers would just pay the VAT if there was a realistic chance they may have to justify the transaction.

I'm heading down the motorway later and the average speed of the motorists will be over 80mph. There's little chance of getting caught and everybody's doing it - not a single person thinks of themselves as being part of the criminal fraternity. If a camera system was devised which guaranteed a fixed penalty every time you exceeded 70mph motorway speeds would plummet.

You might be able to get away with it by swapping number plates but most people would recognise that as criminal rather than just being in a rush.

wotsthat

dryhat wrote: »

You have to remember that Bitcoin is not just about bitcoins as a payment system - that's just the first "app", if you like.

It is the "blockchain" technology behind the payment system which is the true innovation and it allows for so much more than payment transfer.

Understanding this new technology and what it can do is the key to understanding the potential for change in all sectors of the economy.

Payment technology is improving in the non-bitcoin world too which is why cash is becoming an old fashioned way of transacting.

Cash will probably remain King in the criminal world but that presents a problem - as cash use falls the proportion of cash associated with criminal activity increases and will allow more targeted enforcement measures.

The same thing will happen with Bitcoin - if it keeps getting easier to transact electronically using conventional money then what's the point of Bitcoin? Bitcoin will become (even more so) an indicator that the user has something to hide.

Most people IMO couldn't care less about the blockchain technology. All they want to do is to be able to transfer income to sellers to be able to buy stuff. Bitcoin is just an added currency risk.

kabayiri

Meh
I pay for my kitchens in gold

System

Generali wrote: »

Ah but there need to be cash inputs and outputs. If I'm going to 'get the VAT off' for paying cash then I need to get hold of the cash somehow.

I think that's because you are only an amateur dabbler in the black economy, looking for a one-off VAT avoidance, and thinking from the perspective of an ordinary salaried person.

The real black economy is invisible. It probably ranges from criminal activities, drug dealing, arms smuggling, duty avoidance, prostitution, through to unregistered businesses, illegal employment of immigrants, through to milder enfringements of rules like cowboy builders and tarmac drive layers.
Perhaps most of the cash just goes round and round. Paying cash to your builder would be the equivalent of meeting the Krays at a social function. Fun to experience the thrill, but only safely dabbling a toe in the murky waters of the real thing.

tomterm8

wotsthat wrote: »

Someone paying cash to evade VAT doesn't really see themselves as being part of the criminal fraternity. I'm sure most of these buyers & sellers would just pay the VAT if there was a realistic chance they may have to justify the transaction.

I'm heading down the motorway later and the average speed of the motorists will be over 80mph. There's little chance of getting caught and everybody's doing it - not a single person thinks of themselves as being part of the criminal fraternity. If a camera system was devised which guaranteed a fixed penalty every time you exceeded 70mph motorway speeds would plummet.

You might be able to get away with it by swapping number plates but most people would recognise that as criminal rather than just being in a rush.

I obviously didn't get my point accross...

Someone, somewhere, of a criminal bent, will work out a way of getting around the system that won't look dodgey to the ordinary honest tax evader.

michaels

No one else worried that letting the authorities have sight of every transaction we make is pretty dangerous given the possibility that they may be corrupt at an individual or even national level?

No doubt the response is 'if you aren't doing a anything wrong you don't have anything to worry about' but what when the definition of what is wrong changes over time, perhaps alcohol will be prohibited again, perhaps reading publications critical to the govt will be outlawed and there will be no way to get round such restrictions because it will not be possible to pay for the newly outlawed activities.

danothy

michaels wrote: »

No one else worried that letting the authorities have sight of every transaction we make is pretty dangerous given the possibility that they may be corrupt at an individual or even national level?

No doubt the response is 'if you aren't doing a yhtinv wrong you don't have anything to worry about' but what when the definition of what is wrong changes over time, perhaps alcohol will be prohibited again, perhaps reading publications critical to the govt will be outlawed and there will be no way to get round such restrictions because it will not be possible to pay for the newly outlawed activities.

I suppose one could stop doing such things, as it would be wrong to do them, then have nothing to worry about.

Thrugelmir

Black economy doesn't have to be payment in cash.

Could be physical items such as cars. Years ago a girlfriends dad used to run an exotic second hand car show room. Swopped a Lotus Elite for a swimming pool in the back garden. No cash passed hands.......

Generali

michaels wrote: »

No one else worried that letting the authorities have sight of every transaction we make is pretty dangerous given the possibility that they may be corrupt at an individual or even national level?

No doubt the response is 'if you aren't doing a anything wrong you don't have anything to worry about' but what when the definition of what is wrong changes over time, perhaps alcohol will be prohibited again, perhaps reading publications critical to the govt will be outlawed and there will be no way to get round such restrictions because it will not be possible to pay for the newly outlawed activities.

Surely the whole NSA/Google/Facebook thing has shown that if you make something convenient enough, people will give up their privacy.