US senator asks: Will Bitcoin replace Swiss bank accounts? Senators have held a second hearing on Bitcoin as America's dinosaur politicians struggle to get to grips with the cryptocurrency. On the second day of the hearing seven senators attended, as compared to just one in the initial proceedings on Monday. Tuesday's panel included Ernie Allen, CEO of the International Centre for …
I thought one of the points to bitcoin is that it's a non-national currency, so it will make it easier for *everyone* to conduct business across state/provincial/national lines, both the savory and unsavory characters. The ultimate question is whether we want to throw the proverbial baby out with the bathwater in this case. I would argue that we do not. Surely there must be other, less "Orwellian" methods of tracking down criminals than monitoring everyone's bank accounts and currency transfers.
... and guilt by association therefore guilty seem to be the main themes in this thread.
Guilt by association therefore guilty
Bitcoins, pedos, tax evadors, tax avoiders, terrorists, ... , therefore all in the same group therefore guilty.
Cost analysis
While it saves money to take no action then take no action until it costs more to do nothing and then take action?
@Scott 1:
Re: "The point?"
BitCoin is a currency that is anonymous, has distributed control and is inflation proof. For thee and me these are good things.
The people who currently hold the reigns of power maintain their own centralized control over commerce and use inflation to illegitimately transfer money from those who get inflated dollars from the source.
Here is how it works:
The world has 100 units of value. The state gains ownership of a portion, say 10% and then issues fiat currency initially backed by some credible store of value like gold. As long as they can keep the ruse up, the state can keep on printing new dollar bills ostensibly redeemable for the gold even though they have now issued more fiat currency than they have gold available for redemption.
Eventually, we wind up with a situation like we have today, where as long as the dollar is propped up somehow they can continue to print money.
As long as the currency can be propped up long enough to allow the ones issuing currency to unload it at its non-inflated value, the net effect of this is similar to:
$100 total 'value' in system as measured in Unrealistically Stated Denomination (USD) at par with Good Original Legal Dosh (GOLD).
Federal Excise Demons (FED) issues $100 in USD
Now there is $200 nominal USD in value, though still the original actual value in GOLD
Lets say the FED is one group starting with nothing except the ability to print a fiat currency and get people to accept it as if it is worth the same as GOLD and People Using Belief Like Inherent Credulity (PUBLIC) is another group starting with $100 in GOLD.
The FED prints $100 in USD and starts buying gold with it. If they can keep the fiction alive, even though USD value will drift downward to one half so that the amount of GOLD equals the amount of USD, they can transfer wealth from the PUBLIC to the FED simply by printing money over and over.
So now, half the world's gold resides with the FED and the PUBLIC has $200 in USD and the other half of the world's gold.
The fed then prints another $200 in USD and uses that to buy gold.
So now, three quarters of the world's gold resides with the FED and the PUBLIC has one quarter of the gold and $400USD
Eventually, the PUBLIC will have a small portion of the gold and $2000 USD valuing GOLD at roughly 20 USD to one GOLD.
If such a process was repeated enough times we might see the 20USD per one Gold rise to, say 1200USD per one GOLD. At that point, the vast majority of wealth has shuffled through the FED and the FED will have effective control over both USD and GOLD.
Long story short, you can't do the above with BitCoin because creation of it has a hard limit set by mathematics. Our fictional FED are currently issuing imaginary USD and transferring real wealth to themselves at will. For them, a distributed control inflation proof currency of any kind cuts off their ongoing supply of real wealth. They cannot gain centralized control and they can't inflate the currency to do their magic wealth transfer as shown above. Worse (for the FED), making it anonymous stops them from finding any points of control for the currency so there is no way to develop any coherent plant to steal it.
BitCoin has some issues and I doubt it will be *the* crypto-currency. However, I am pretty sure we will have a crypto-currency of some kind that is similar. People will vote with their feet and simply start to denominate and transfer their wealth using BitCoin or whatever replaces it.
> (...) is inflation proof.
You misunderstand inflation. It isn't entirely driven by government printing money and it isn't entirely bad. For instance, the big fear in the Eurozone is of deflation.
Equally, your gold example is flawed, you are taking gold as an absolute value. You could take the dollar as an absolute value and say that gold fluctuates wildly against that too.
The problem is rapid fluctuations of the currency, and any currency that is valued by virtue of a market half the world is trying to stop will fluctuate wildly. It does not matter how many bitcoins there are when they can drop in value (vs cocaine for instance) by a third overnight.
What matters is the perceived worth of what backs the currency, in the case of the dollar this is the US itself. In the case of bitcoin, it's the market in illegal "stuff".
Indeed.
It's not well known that the drawback of hard money (gold, silver, bitcoins) is that if they are adopted as a nation's sole currency, they inevitably drive the vast majority of the population into serfdom. If they are combined with usury (lending money for interest) this happens so much faster.
In the middle ages the gold all resided in rich men's treasure chests, the silver all resided in merchants safes, the copper resided in freemen's hidey-holes and everyone else was a serf living fifty meals away from death by starvation. It took a war (usually civil war) or a plague to (temporarily) jog the system out of otherwise permanent economic stagnation, depression and deflation.
Eventually the Black Death laid the seeds of a modern economy, by killing half the population, thereby making labour scarce and redistribiting the rich men's coffers (thereby creating inflation). The Spanish then unwittingly kept the ball rolling by plundering all the gold from the natives of what became Latin America ... which imported inflation first to Spain and then, in a more beneficial form, to the rest of Europe. By the time that stimulus dried up, fractional reserve banking and paper money had evolved to a modern form. Which has its own problems, especially when no longer judged against gold bars, but which (so far?) has not proved quite as disastrous as the alternative.
If bitcoins ever become a global store of value as well as a global medium of exchange, we are in big trouble (deflationary collapse). Ditto, if there's ever one world paper currency and one world central bank (corruption, then inflationary collapse). It's competition between multiple currencies that keeps the present system going despite the periodic crises. There's probably a parallel to be drawn with a natural ecosystem.
You pretty much nailed it. A finite currency cannot work in a world with expanding population that requires business to grow infinitely. In rather short order the resource has been completely allocated in the hands of a very small majority.
That's pretty much what we have with current currencies too, but we can make more. You can't do that with finite currencies. Either a bunch of people have to go, or businesses would have to be capped at a predefined level and no new businesses created without an existing business disappearing through various forms of attrition.
Anonymous currency is a destabilizing problem for any country attempting to hold legitimate elections.
The issue isn't with tracking drug dealers or pedophiles. Those are actually just side benefits. The real issue is in determining who bought an election. If Chase bank can funnel $500 million into a presidential campaign fund without anyone, but the recipient, knowing then that is a huge issue. Yes, I'm not naive enough to think that politicians can't be bought through a variety of ways, but most everything can be traced.
Bitcoin may appear to be a good thing, but it has the potential of being highly disruptive to a lot of different activities.
Anonymous currency is a destabilizing problem for any country attempting to hold legitimate elections.
Not for the elections. Provided they are secret, as a voter you take the bribe and then vote however you please, with no fear of retribution. The real problem is corruption of the government or its officials by someone willing to splash a lot of untraceable cash around. It's an even worse problem if the government is not properly re-elected on a regular basis (witness China). Free, fair and secret elections tend to result in the most corrupt politicians being unseated ... eventually, once the electors notice the bad smell.
"Anonymous currency is a destabilizing problem for any country attempting to hold legitimate elections."
Well, as already stated, you can't buy votes directly. But what all this cash does buy is media access. Throw a few hundred million at an election and it doesn't end up in the candidates or the voters back pockets. It ends up in the pockets of the media machine. Attack this problem* to reduce the demand for cash to run a successful campaign and the whole anonymous funds problem becomes a smaller issue.
*Shorten the election season. Candidates don't have to travel across the country by horseback or train anymore. You go before the cameras or on line, state your piece and the people vote. Sure, TV time will still cost a bundle per minute. But you reduce the number of minutes available to campaign.
Since the Supreme Court has let the cat out of the bag as far as money goes, these politicians must be asking how I can get "Bitcoin" today so anonymous donations can really start rolling in.
Future News: "In an unusual bit of news today, a candidate of neither the Democratic or Republican party received the most donations to their campaign contributions . Candidate X has based their platform on key issues that have been avoided in the past that some believe have been heavily influenced by large corporations, the banking industry and certain military contractors".
Oops, may not today.
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