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back to article Bitcoin gets a $100 haircut on rollercoaster trading run

Virtual currency Bitcoin lost $100 in value relative to the US dollar on Wednesday due to panic selling by its devotees. The currency began tumbling from a high of $260 on Wednesday after major Bitcoin exchange MtGox started getting hammered by many micro trading requests per second. This bout of high-frequency Bitcoin trading …

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Happy

What can I say

But hahahahahahahahahaha.

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Anonymous Coward

Re: What can I say

Average age of bit coiners, 19......

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Re: What can I say

Yes I'm sure those people who bought at $10 are feeling awful that it's now only worth $170 instead of $260...

Or to put it another way, this "crash" has simply put it back to the value of a few days ago, but it's still way up on historical values. The Register is at least more accurate in its reporting - it's not so much a crash, more that we've seen some rapid up and down. It's funny just how out of date even the web news is with some of the articles I've seen, gloating about a crash (which they claim they saw coming, when it's not really a useful prediction if they've been saying for months, especially when the post-crash value is still far higher than when they'd started claiming it was a bubble), yet by the time the article goes live, the price has already gone up again.

The losers would be people buying high and selling low. Some winners would have sold at the peak, and bought back again when low. But for a lot of other people, the fact that bitcoin was worth less at 6pm 10 April that it was 12pm 10 April is somewhat irrelevant, if the value is still higher than what it was say on 12pm 3 April (or something like that - I forget the exact times/dates).

I think it's a good thing for the currency to stabilise for a bit anyway, as rapid rises can put people off its potential use as a currency as much as rapid falls.

(If bitcoin really did crash to say $1, great, I'm buying 10, as it seems worth a gamble...)

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Re: What can I say

It's not a currency.

It could become one in future. When hell freezes over. But due to the opacity, scams, general fail of all the main players, massive volatility, and built in deflation - it'll probably never make a viable currency.

It's a very high risk investment, with zero intrinsic value. So although it may not be designed as a scam, it's almost certain to end in tears. Any currency that loses 50% of its value overnight, or can gain 100% of it's value the previous morning, is worth about as much as a Weimar Mark or a Zimbabwe Dollar. Or possibly soon, Euros...

Finally, there's no problem if you risk $10 you can afford on cheap coins, in the hope of ludicrous gains. Even if it should be obvious that any investment that can make you 100% profit in a morning is going to be somewhat horrendously high risk... But if there are really Eurozone savers desperate to protect their life savings from the incompetence of the Eurogroup - I would hate to see them fucked over by the scammers and idiots involved in Bitcoin, to follow on from the fucking their currently getting in order to help Angela Merkel get re-elected and keep the Euro-nutters dreams of EU statehood on life support.

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Re: What can I say

Being a currency, as you describe, isn't either/or. Of course right now, it isn't something you can trust large amounts of money in. But it has some uses for transactions, similar to (and potentially better than) things like Paypal. (With Paypal's track record, I don't trust them at all, so if I have to use Paypal, I take the money out asap, so the trust argument doesn't work.)

And you haven't explained why such a thing couldn't grow to become more useful and stable. Indeed, the mention of the Mark is the classic point - by your own argument, does that mean that paper money is inherently worthless, because there have been examples of hyperinflation?

"Finally, there's no problem if you risk $10 you can afford on cheap coins, in the hope of ludicrous gains. ... But if there are really Eurozone savers desperate to protect their life savings from the incompetence of the Eurogroup - I would hate to see them fucked over by the scammers and idiots involved in Bitcoin"

I entirely agree - but are there really people putting their life savings into bitcoin? Perhaps some, but I would have thought that most of the people talking about it and dabbling in it have put in relatively small amounts ($10 is barely a couple of pints; even $100 is only slightly over 1% of a yearly cash ISA allowance, and a portfolio with 1% high risk seems rather conservative to me - some people here spend $100s on a gadget just so they can go "shiny" that they then throw away next year). As such there seems to be a bit of a straw man here, portraying people who have used bitcoins as people about to lose their life savings, or people who can't afford to lose any money. I suspect if anything, it's probably a lot of people with plenty of money to spare.

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Meh

Re: What can I say

It's a terrible replacement for paypal - once a vendor has your coins there's no way to get them back, if they don't deliver or just drop off the face of the earth, you have no recourse. Paypal and credit cards are very, very good for the consumer.

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Re: What can I say

Paypal is fine for consumers, but horrible for small sellers. Their chargeback system and fees are the work of the devil. Bitcoin is lacking some infrastructure currently, but this will change providing we see some medium term stability.

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Re: What can I say

Thing is, without chargeback, why would I trust a small seller? I'll stick to the big one.

And stability ain't looking so possible now. Gox has just closed its doors (for 12 hours apparently) and some of the other exchanges are trading in the $70 range! That's a $200 haircut...

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scammable currency

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Facepalm

It's the only non-scammable currency. Do try to keep up.

The problem last night came from the overwhelming popularity of one of the banks and its inability to meet skyrocketing customer demand, not the inappropriateness of the pretty paper the government prints (to put it in terms the ignorant might understand).

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Stop

Non-scammable?

That depends entirely on what you do with it. As it has no chargeback capability it's a scammer's dream in a lot of ways. I know, I know, it's like cash and you can't chargeback with cash either. However this does mean it's not a very good online payment system, which is one of the things that it gets pushed forward for.

What's that, chargeback is open to abuse? Sure is, but compared to the abuse you'd get without it, and the lack of trade as people like me *never* shop online again, it's a blessing.

Now, as for currency use, it's pretty worthless as it fluctuates in value so damn much. And it always will because there's no central bank around to try and keep it stable. Were those the 'scammers' you were thinking of when you said "It's the only non-scammable currency."? I rather like them, they keep my currency roughly stable, keep a low, positive level of inflation (a positive for myriad reasons), and expand the money supply to suit the economy. They do make mistakes, sometimes huge ones, but it's better than a rudderless, bubble prone, speculative 'asset' that encourages mass hoarding.

IMHO, of course, you are within your rights to disagree with any and all of that.

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Re: Non-scammable?

Is there any currency that supports chargebacks?

Remember this is a currency not a payment processor.

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Stop

Re: Non-scammable?

Remember this is a currency not a payment processor.

Which is exactly why I said "this does mean it's not a very good online payment system". And you'd be surprised how many people say, when they've had it pointed out to them just how bad a currency it is "but remember this is a payment processing network too!"

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Re: Non-scammable?

Yes, part of the problem with BitCoin is that some people buying into the whole BTC thing aren't able to differentiate between BTC as a currency and payment processing systems. BTC is NOT a payment processing network. It does have transactions, but they exist because it is the only way to trace the currency at all!!

For true online payments, anyone using BTC for payment should be using actual payment processors. Those would be able to initiate chargebacks if needed.

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Re: Non-scammable?

No part of the bitcoin system prevents chargebacks being implemented, just as no part of Sterling specifically enables it. If someone uses either currency in something illegal then tell the police. The volatility makes it a poor currency at the moment but it's still quite useful as a money transfer system in spite of this, as it's fast, liquid (usually) and cheap.

Deflation is not necessarily a bad thing. If you want a 3% return on your lending in an inflationary environment then you charge inflation+3%. If you want the same return in a deflationary environment then you charge deflation+3%. If you have a business idea which you think will generate in excess of either inflation+3% or deflation+3% and also enable you to repay the capital then you should proceed, nomatter what the inflation or deflation rate is.

Not every company selling IT hardware has been a huge success, but falling prices certainly haven't killed the industry.

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Re: Non-scammable?

No part of the bitcoin system prevents chargebacks being implemented, just as no part of Sterling specifically enables it.

Well, except we're talking about bitcoin-itself-as-payment-method, one of the many things its boosters say it's awesome for, a drop in replacement for paypal and credit cards, which it fails hard at. And before you say "nobody says it's the perfect payment method", please look around the internet and in fact in this very thread.

If you want a 3% return on your lending in an inflationary environment then you charge inflation+3%. If you want the same return in a deflationary environment then you charge deflation+3%.

But why would you bother? If deflation was (for instance) 4%, you're better off sitting on the cash and not taking the risk. This is the fundamental difference.

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Re: Non-scammable?

You didn't mention the part of bitcoin which prevents paypal implementing a chargeback mechanism for bitcoin payments. Cash has no chargeback mechanism, but you can pay to use a mechanism created by someone else...or choose not to. Bitcoin...the same.

Apart from the fact people do and have invested during periods of deflation, there is really no reason for there to be no inflation in a bitcoin economy. The pretty paper is not really printed by the government - they just mint the coins. The paper is printed by the banking system, which is why it's a promise to pay a number of pounds and not an actual quantity of pounds. The balance of your bank account also does not represent a stock of pounds, it's the result of many credits and debits denominated in pounds. And the total sum of bank account balances can increase without the government needing to increase the number of coins. So a banking system using credit-based money denominated in bitcoin is not inconceivable, and would grant you the inflation you desire.

The corollary of your 4% argument: If inflation is 4% then everyone would look for investment opportunities which lose 3% per year; they will come out on top by destroying value. Do you see that you don't make sense?

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FAIL

Re: Non-scammable?

"You didn't mention the part of bitcoin which prevents paypal implementing a chargeback mechanism for bitcoin payments. Cash has no chargeback mechanism, but you can pay to use a mechanism created by someone else...or choose not to. Bitcoin...the same."

Right, so you agree it's a crap payment method, and in order to make it into a good one we effectively need paypal and VISA. excellent.

The pretty paper is not really printed by the government - they just mint the coins. The paper is printed by the banking system...

This is factually false. It's outsourced by the government to printing firms like De La Rue. Are you actually labouring under the illusion that coins are 'real' money but notes are just the bank promising real money? What an interesting world you live in.

So a banking system using credit-based money denominated in bitcoin is not inconceivable, and would grant you the inflation you desire.

So why bother? We already have that, so bitcoin adds nothing. Also, as with payment systems, it's good to see a BTC enthusiast admit we'll still need banks issuing fiat, only now we've decoupled them from any government regulation where it comes to currency. Awesome.

If inflation is 4% then everyone would look for investment opportunities which lose 3% per year; they will come out on top by destroying value. Do you see that you don't make sense?

No, in fact you don't make sense, that sentence doesn't even make sense. What the hell are you even trying to say there? I'll restate in case you missed the point -

If inflation is 4% then you come out behind the game by 4% if you stuff your mattress with cash, so instead you look for saving and investment opportunities to earn greater than 4% so you can at the least break even. This has knock-on positive effects on the economy.

If deflation is 4% then you come out ahead of the game by 4% just by stuffing your mattress. This has no positive knock-on effects for the economy.

To paraphrase your initial comment on this and really hammer it home - if you want 3% return in an inflationary environment you charge inflation + 3%, at the end of the day you come out 3% better off than if you had done nothing. If you want 3% return in a deflationary environment you *could* charge deflation +3%, but if deflation is greater than 3% you'd actually be better off doing nothing.

Do you understand the difference yet?

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technically skilled?

"people investing into the currency that are not technically skilled enough to understand the complex principles on which the system works,"

It's a thing - people want to buy it the price goes up, people think that the price isn't going to go up anymore they will sell to people who do.

You don't need to understand distribute hash schemes or elliptic curve cryptography to figure that out

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Holmes

Re: technically skilled?

Is anyone actually surprised here? If so I have one word, 'Tulips' (which may or may not have been a thing, but the underlying story is useful). Economics is just daft. And why not? It's driven by humans who are, more or less, by definition nuts.

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Happy

Who do these people think they are?...

Investment bankers???

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Anonymous Coward

Looking at the price now, it's just under £110. Or essentially, the same price it was on Monday?

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WTF?

D'Oh!

Well, it's definitely not a Ponzi scheme. Bernie Madoff's investment pyramid is a Ponzi scheme. "Quantitative Easing" is Ponzi scheme. Social security is a Ponzi scheme. This here? Just the standard "bubble". Bubble up, bubble down.

This dramatic rise has led to people investing into the currency that are not technically skilled enough to understand the complex principles on which the system works

Unskilled? It happens to the "best". Quite a few ministers of finance and economics as well as that nobel-prizewinning economist-clown writing columns in the NYT are not skilled enough to understand even basic economic principles. What you gonna do about it? Always look on the bright side of life...

Bitcoin's virtues as a digital currency may not yet be clear, but right now its devotees are treating it like a commodity, and this can only end in tears.

Money *must* be a commodity, what else? And it must not be easily generated either. Next you will be telling me cheap paper with pretty pictures and flowery signatures of semi-dead males on it and monopolized/imposed by a government outfit hidden in a repurposed 18th-century building with lots of marble and large wooden doors is "money". I laugh!

(Although, is bitcoin a "money"? Opinions diverge)

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Re: D'Oh!

Oh noes! The money tree is broken, and this one was going to work!

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Meh

Re: D'Oh!

Eh, Social Security is NOT a ponzi scheme. Repeat. NOT. Stop being silly.

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Re: D'Oh!

There ought to be an addendum to Godwin's Law. In any financial discussion online, someone will misuse the phrase Ponzi scheme in order to look clever and more knowlegable than they actually are.

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Alert

Hard landing?

Those credulous men in their ponzi schemes,

They go up diddley up-up, they go down diddley down-down!

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Alien

'tarded

cointard

freetard

commentard

Yet another reminder that when it comes down to it, this is just another blog.

An alien: as is the concept of professional journalism.

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Joke

Re: 'tarded

Killraventard?

:)

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Re: 'tarded

Too many people have placed too much emphasis on 'the net' as an alternative to meat space, this is one example, and Assange's rambling 'theory' (perhaps I should not grace it as such) of politics and democracy is another. Quite a few other online bubbles have burst and, as someone else has pointed out this has much in common with the Tulip bubble, the South Sea Bubble, and so on. A few years back the 'dot com boom' crashed and the zombie business were culled. This is going to be worth watching, not least because the banks have been offering their own alternatives.

When I heard someone say a few days ago that this one is rock solid, immune to the travails of the outside world, I sat upright. Why? Because I'd heard the very sort of thing that I would expect to hear when something goes wrong.

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Alert

Re: 'tarded

Killraven,

The Register is a tabloid. Deal with it, or don't read it. They do serious news coverage, they do irreverent news coverage, they build paper aeroplanes and launch crash them from balloons, they do consumer research into some of the most horrific 'food' known to drunkard...

They also insult their own userbase in a friendly way. This is classic group bonding. Just ask any anthropologist.

I leave you with the thought that an overheating turkey vulture will urinate down it's own legs, in order to cool itself down. Whether you feel this says anything about El Reg is up to you...

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Re: 'tarded

"The Register is a tabloid" humour wins me over every time. And this new money is so easy to phone in phone out. Especially when the local loan shark is having coffee.

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Joke

Re: 'tarded

an overheating turkey vulture will urinate down it's own legs, in order to cool itself down.

Well - who wouldn't?

:D

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Where's the value?

Unless a currency is based on some underlying share in something of value, then it is going to be open to wild fluctuations in exchange rate.

A GBP, USD, or even a Zim$ is at least tied to something tangible. A bitcoin is tied to nothing. It has no intrinsic value at all. Only a complete moron would "invest" in this.

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Re: Where's the value?

You are aware that the GBP, USD or any other currency aren't tied to anything tangible as well? They are fiat currencies. They have no intrinsic value at all. Atleast a bitcoin has the value of the leccy needed to generate it.

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Re: Where's the value?

Keep believing that, because if enough people stop then the currency will collapse.There's no tangible asset underlying the USD, nor the GBP; governments can (and do - we call it "quantitative easing") create more money at will. Even if you hanker after the days of currency being backed by gold, that's really no different to Bitcoin - someone digs sparkly rocks out of the ground and it instantly becomes money?

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Re: Where's the value?

Currencies tied to nothing are known as 'fiat', and that is most currencies since the dropping of the gold standard. However, even though they are all based on faith alone, some also have the interests of a nation underpinning them which dampens volatility. Remove any motive to dampen volatility, and this is going to happen.

Interestingly, gold investing itself has something of a fiat nature, as the material properties are not as valuable as the trading price. If you want an exchange format you can really believe in, I suggest sheep.

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Facepalm

Re: Where's the value?

While it is true that they are fiat currencies and have no intrinsic value, they are tied to something tangible.

That "promise to pay" is backed by the assets and reputation of the country (or countries) that owns the currency, vested in the reserves of the appropriate Central Bank.

How much precious metal, hard currency, etc does the Bitcoin Exchange hold to underpin its promises? What's its GDP?

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Re: Where's the value?

The currencies thrust onto people are no different - just check it out - we've been duped into thinking that they are backed by Gold. As I understand it only the Swiss Franc and now more recently the Renminbi are backed by Gold.

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Re: Where's the value?

Well the USD, GBP and most currencies are backed by their countries armies, some of them have nukes.

As far as bitcoin being worth the electricity used to generate it - can you turn it back into electricity?

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Re: Where's the value?

Tied to something tangible? Do you even have an idea what a fiat currency is? I suggest you stop posting and go back to learning about how wishy-washy all of the financial system is.

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Let me troll for downvotes

The bitcoin bubble isn't a bubble in bitcoins: it's a bubble in fiat currency paranoia. The bitcoin bubble will only burst when the fiat-currency-paranoia bubble bursts. So I predict bitcoins will continue on an upwards trend for some time.

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Meh

Re: Where's the value?

The U.S. dollar hasn't been backed by anything other than trade interests in nearly a century. Unless you are incredibly old or have terribly bad teachers you couldn't have been fooled.

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Anonymous Coward

Re: Where's the value?

Fiat or gold-backed could be a very dull distinction. Bitcoins are set apart in that they are ultimately finite, by defintion. You may regard that hard fact as tangible or not.

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Facepalm

Re: Where's the value?

"Well the USD, GBP and most currencies are backed by their countries armies, some of them have nukes."

Cool, I'll just take the money in my wallet down to Threadneedle street and exchange it for a couple of tanks and a harrier jump-jet then.

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Re: Where's the value?

The currencies thrust onto people are no different - just check it out - we've been duped into thinking that they are backed by Gold. As I understand it only the Swiss Franc and now more recently the Renminbi are backed by Gold.

Solaris_fan,

You don't understand it then. No currencies are fully backed by gold. The Gold Standard was a horrible farce that failed miserably and led to the 1930s depression. The next attempt at it, with Bretton Woods didn't work properly either. The Euro is causing a depression, just like the Gold Standard, but without the shiny bars.

To many of the other posters, major international currencies aren't backed by commodities. But they are backed by the countries that use them. The reason the Euro is in serious trouble is that people are beginning to suspect that when the going gets tough, countries will leave. They are aiding this feeling, but always nearly doing enough to bail themselves out, but never quite doing the job properly, and always doing it too late. Eventually the brinkmanship will fail, and the Euro will most likely fall over.

If however you've only got the one currency, and you've got national assets (not least a population and modern economy), plus a government and a tradition of a rule of law, then your currency is backed by something. Sure our government could inflate the Pound to Zimbabwe like levels, but there's 63 million of us who are stuck with it, so they're unlikely to.

Also, history helps here. Britain has hundreds of years of not defaulting on its government debt and not destroying its own economy. Even when debt hit 200% of GDP a couple of times from fighting world wars. Britain invented national debt 250 years ago, and has always paid up. The US also have a long history of abiding by contract law, and not defaulting.

The Euro has a much shorter history. If today's news about the horrifically fucked up Cyprus bail-out causes it to leave then the Euro will be in a bad state as a fiat currency. Where no-one seriously believes the voters and governments will honour their commitments.

Bitcoin has even less backing. There is no government to stand behind it. Its short history is of hacking, scams, collapses in confidence, bizarre screw-ups where people have to roll back software updates or exchange trading to correct for errors, and randomness. Any faith in that system would be absurd. And there's no government or workforce to stand behind it.

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Re: Where's the value?

"Well the USD, GBP and most currencies are backed by their countries armies, some of them have nukes."

I understand how a countries armies can at the last resort, force the taxpayer and future generations of taxpayers to exchange their labour resources to back\cover the debt of a currency. However nuking them would be a bit counter productive.

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Re: Where's the value?

"Britain invented national debt 250 years ago, and has always paid up"

Well, supposedly. If you were holding some AAA rated fixed rate ten year gilts in 1970, then you'd not have been too happy by 1980, when the actual value of your total return would have amounted to about one third of the value of the sum you'd invested.

And this time round the pattern will be the same, of some prolonged and generously proportioned inflation. Except that it won't just be Britain, but the Yanks and the Europeans will do the same thing, because they've got vast debt mountains they've no idea how to repay, along with impaired assets they'd rather not write down. Admittedly the Germans are determined not to see debt mutualisation, and not to see inflation, but their choice is simple: Accept those things, or accept some form of collapse in the Euro as the system currently exists. As Germany is an export dependant economy, and as the German Chancellor will always be a committed Europhile, my guess is that the German population will continue to be reassured that inflation and mutualisation won't happen, even as their leaders secretly plot to ensure they do.

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Coat

Re: Where's the value?

I understand how a countries armies can at the last resort, force the taxpayer and future generations of taxpayers to exchange their labour resources to back\cover the debt of a currency. However nuking them would be a bit counter productive.

moonface,

That's because living in your Faraway Tree, you're not as far-sighted as the modern politician. I think you'll find that once you've nuked the electorate, they won't be able to hide in the dark, not paying their taxes.

Plus they'll work much harder, due to their new get up and glow...

Perhaps I'd best get my coat.

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