Bitcoin Forum

Hi

The US Dollar is in serious trouble

See: http://udopage.com/news-articles-economics.php (Just some of my own Research)

What would happen if the Worlds economies all decided to use Bitcoins in place of the USD?

Could Bitcoins work in such volumes and what would the Value of a bitcoin be in this situation?

Thank you..

The dollar is fine, it might have a slight cold but not even the flu, the death of the dollar has been exaggerated.

If bitcoin replaced the worlds currency, a lot of people would be screwed as they have no computers, though we an print bitcoins, it would take time to go over.

there is over 4 trillion dollars in circulation  there are 6842600 bitcoins, so each coin would be would be worth $580,000. Which means miners would find about 1.2billion every week, leading to a soaring crime rate in stolen ATI cards. Satoshi would instantly be the richest man that ever lived.

True, Not Everyone has a computer. But computers are everywhere. Whats the problem writing an application front end that turns your instance of Bitcoin into a local bank. Each customer has bitcoins or percentage of with a unique Bitcoin Number.

According to this site:


http://money.howstuffworks.com/how-much-money-is-in-the-world.htm

In July 2009 could expect to find around $8.3 trillion in existence.
By now there should be even more and thats "only" USD...Thats back in 2009...

By now, it might be the double!

So thats each coin worth $2300,000.

Perhaps around 1/4th of the worlds money supply is kept in $?

So 4 x $2300,000 = $9200,000.

So if a bitcoins gets worth 1/1000 all the money in the world, each one would be worth around $9200.

And then there is gold...And not forget silver...

Makes $13 sound quite cheap...

What is the basis for your claim? The whole world is hearing that the US debt ceiling must be raised in order to prevent a default. Moody's is prepared to downgrade the US Dollar from AAA status (the first time in history this has happened). But you say the dollar is "fine". Hmmmm.

This boggles my mind. How screwy is a world in which one's creditworthiness is maintained to the extent that one continues accumulating debt!!! The US must assume further debt to be considered more creditworthy? WTF?

This is because the US in theory does not need to default they could just print money but in doing so they create inflation which would hurt the economy.  Also the idea is that the GDP will outgrow the debt.

Think of it this way would it make sense for you to default on your credit cards or take out a home equity line of credit to pay them if times were tight?

Beefy here has smelled of 'shill' since I saw their first post. The avatar doesn't help either.

Per this Wikipedia article (http://en.wikipedia.org/wiki/Derivative_(finance)), "According to the Bank for International Settlements, the total outstanding notional amount is US$684 trillion (as of June 2008)."

Apportioning $685 trillion among 6.85 million bitcoins works out at $100,000,000 per bitcoin. :)

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Micropayments in 3rd world countries are widely done using mobile phones (and not smart phones). See the article at http://en.wikipedia.org/wiki/Mobile_payment and this PDF report: http://www.infodev.org/en/Document.43.html

So the miners will be mining $690,000,000 per hour, and spending a good proportion of that on power.

Smartphones

Not needed. Regular prepaid cheapo dumb mobiles will work just fine. Google it. There's a long PDF report at http://www.infodev.org/en/Document.43.html detailing one study of use of mobiles for micropayments in the Philippines.

The infrastructure for doing this with bitcoins obviously doesn't exist yet, but I don't see why it couldn't. The *end-user* wouldn't need to have the full wallet functionality on his dumb phone, just as long as the carrier does somehow. All the end-user would need is the ability to send a text message saying pay ___ to ___, and the carrier would do the actual bitcoin transaction and deduct the relevant amount (plus fee) from the user's mobile credit, and credit the payee's mobile credit. Actually, I guess they do that anyway without involving bitcoins at all. I suppose the only need to involve bitcoins would be when the user and payee aren't on the same carrier network.

You can't even convince a few sites to accept Bitcoins now, how are you going to convince the world to move to Bitcoins?

The level of delusion on this board is sometimes staggering.

So is the number of trolls.

Oh yes, I forget that anyone who doesn't toe the party line here is a troll...

Come on, it is a silly question, Bitcoin cannot survive if what people see when they come in to research are silly comments like that one. BTC (or more likely another type of crypto-currency) might emerge as an alternative payment method, but it won't take over the entire world's economy, this is not only an unrealistic goal, it fails to recognise how economies work.

Silly question or not, speculation is fun. And seeing as how this is a bitcoin board, coming on here to knock on bitcoin and say how awful it is... yeah, that's trolling.

Yeah

So, only people who are in favour are welcome here? I find the concept of Bitcoin fascinating and interesting, that's why I'm here. It is fun to read so many clueless comments and comment on them from time to time. To point out the utter silliness of such statements is not trolling.

Honestly, I have never seen any place anywhere on the Internet where the term "troll" is abused so much. It has become synonymous here with "BTC skeptic", and that is not what it means. It means someone making false comments with the intention to deceive. To disagree with the majority is not trolling. It is discussion.

Skeptic: I'm not convinced BTC is the best new thing.

Troll: Bitcoin is shit. Why are you using it?

That's inflammatory. It came out of nowhere and totally changed the mood of this thread. That's trolling.

Because I know it will be raised.

Even if it wasnt raised Obama could invoke the 14th and ignore it, the debt ceiling is unconstitutional just no one challenges it.

Even if he choose not to challenge congress he can order the fed to destroy it's 1.6 trillion in bonds which would give us quite some more time.

Also there is a lot of hyper ventilating over the dollar, everyone is leaving the dollar.. blah blah blah blah


when in reality we are still more of a reserve currency than we were in 1995 (http://en.wikipedia.org/wiki/File:Reserve_currencies.svg)

the dollar is a little  low today but that is partially due to standards of living rising world wide and partially on purpose to increase exports and most countries are doing the same.



shill for whom? the dollar? it is the same avatar i use at newsvine. though i dont post there anymore, you are welcome to read my old posts and see if there is any pattern besides that I am mostly a progressive.

Sorry if I dont jump on the "OMG THE SKY IS FALLING BUY GOLD BUY GOLD BUY GOLD!!!"

when I can look at the data for my self (http://www.federalreserve.gov/releases/h6/current/) (and link above with the reserve status and  see how chinas money supply (http://online.wsj.com/article/BT-CO-20110711-714402.html) is growing faster, or how our money supply grew faster in 2001 or the fact that several countries have a higher debt to gdp ration and havent turned into zimbagwae (http://en.wikipedia.org/wiki/List_of_countries_by_public_debt) or how we are still the worlds largest single nation economy. I'm not a shill just a well informed realist who doesnt get his economic info from blogs or people with lights and sound machines.


Thats cause that is not an accurate description of what is about to happen. You know we have a trillion dollar plus deficit? WE are going into more debt whether we like it or not. IF we dont raise the debt ceiling and sell more tbills, we wont have money to pay off the debt we are going to incur. OUR LONG TERM rating is actually on shaking footing due to our debt to gdp ratio. THE WORLD DOES NOT WANT US TO ADD MORE DEBT, they do want us to pay our bills for the debt we have.

You're right.  The dollar is in serious trouble.

But the problem isn't the spending limit.  It's the spending.  It's the rate of debt increase.  It's the rate of debt acceleration.  It's the attitude in Congress that we can keep on spending like drunks forever and if China won't lend us some more, we'll just take it all from the people, as long as Congress gets to do the spending.

Switching to a currency that Congress doesn't control and the Fed can't devalue would indeed throw an interesting wrench into the monkey works.  But that just means Congress would fight back and tear apart anything and everything and anyone necessary to get bitcoin out of the way so they can keep up their spending addiction.



Amen.

Virginia USA is exploring an Alternative to American Currency.

http://www.theconservativeshepherd.com/east-coast-state-explores-alternative-to-american-currency/

Could bitcoin find strength is such a situation.

Bitcoin would collapse under the load far before the entire US economy changed over to bitcoin, let alone the entire world economy.

https://en.bitcoin.it/wiki/Scalability (https://en.bitcoin.it/wiki/Scalability)

And, assuming we did somehow make bitcoin about 100x more scalable than it is, sometime before the entire US economy transferred over to it we'd have bitcoin heists which made the recent mtgox hack look like pocket change.


Quoted for truth

Also keep in mind that if people get word that the world is going to bitcoin, quite a few people will hoard their bitcoins, making less in circulation for buy in, so the price would likely be far above that, a few years after the conversion people probably wont see 0.001 btc.

Just a thought i had =P

Never thought of this. I guess that bitcoin was designed to be a small currency and can not grow that much. I don't think that is bad... I would call it realistic.

No, this is untrue. You don't have to do all transactions in bitcoins - if it is accepted as world's monetary backing, you can still use paper money or electronic transfer inside one bank, the actual bitcoin transfers would be happening on an inter-bank trading. You won't be buying in-store using bitcoin directly - there will be an intermediate processor, just like Visa, which would aggregate thousands of micro-payments and send one BTC transfer.

If the transfer costs rise significantly, and blockchain grows, only big institutions with their own servers would continue digging blocks, and only large transfers would be financially viable.

However, that is perfectly fine, because no matter how many banks participate or how many different currencies are created, the backbone of it would still be valued in BTC.

Except that if you're relying on financial intermediarys (eg, like Visa, as you note), they're going to charge non-trivial fees on top of the core BTC transaction fees that will still have to go on, and that eliminates one of bitcoin's big benefits. We're back to electronic transaction means that skim at least 1-3% of each transaction.

Nobody ever said Bitcoin was going to be the ONLY currency on the planet... nobody thinking it through, anyway.

Bring on the competitors!

skeptics always claim that there won't be enough bitcoins or it won't "scale".  they also say we need a little bit of inflation to keep wages increasing.  BS.

the only ppl that benefit from inflation, mild, medium or large, is the financial industry who has first access to the free money and who controls the printing press.

i say we need a stable currency amount like bitcoin will be in 2030 or whenever its fully issued at 21M.  as the economy becomes more productive (we don't need inflation to innovate) general prices will come down which helps the people.  btc's purchasing power will increase and everything else will be cheaper.  this is a good thing and will occur gradually.  no one special interest group will get preferential treatment.

the economy won't be on steroids like it is now with unlimited credit issuance.  we won't be raping the environment and population growth will be more sustainable.

inflationists are usually financial players who just want to grab what they can now and dump the consequences onto everyone else including our children.

Without really understanding or having thought through things fully...and if the basic premise of the system stands the test of time...

I kind of envision a situation where the coins in the first chain becomes backing for further chains.  Those who hold coins from the first chain would then be able to back a given branch which is managed to their liking, and people could choose which branch to use for similar reasons.  I theorize that if both the 'funders' and the 'users' of a currency need to arrive at a mutually agreeable management strategy, more equitable end results will fall out.

If you adhere to the philosophy that 'money is debt'  (as I, Ben Bernanke, and I believe pretty much all modern bankers do) then it starts to make a whole lot more sense.

If one has run out of the ability to take on debt then they have by definition, run out of the ability to produce money.  And who wants to have dealings with an entity who is in that situation?

Dig up the 'Money as Debt' vid by Paul Grignon on Youtube if you have not already.  I have come to accept most of his assurtions simply because they are so good at explaining so many otherwise baffleing things.  My favorite quote from it is as follows:

  “The process by which money is created is so simple that the mind is repelled.”
        -John Kenneth Galbraith

I did.. wow...

http://video.google.com/videoplay?docid=-2550156453790090544

I must say the Bitcoins Forums are the best forums I have ever been on.. You guys are great  ..

Cheers

There are solutions to the physical currency problem already -> http://bitbills.com/

But would you use bitcoins for physical cash or would you rather use metals?

For physical transactions, I'd really prefer metals. http://shiresilver.com/ has a pretty good solution to this.

Is it really reasonable to think of it this way?
Sure - the financial institutions lend out 'money' which has just been created - but they have to pay it back to the reserve system. (effectively destroying it)
They get to charge a higher interest rate than the reserve in order to fund their operations - but the principal (the money that was just 'created' by entering it into the system at loan-initiation) has to be repaid.

So.. they make money (interest difference) on lending out money that wasn't theirs - but this because they are entrusted with the job of ensuring that the new 'debt money' is going to an entity who will do work in the economy to produce that value (plus some).

They take a risk and have costs in doing their checks on the entity taking out the loan. Seems fair enough no?

As much as I think the financial industry is a flawed and dangerous beast at the moment..  I still don't see how this is 'free money' or 'controlling the printing press'.

What about the pennies? I believe a gram of copper is close to 1¢ Though copper would be much harder to use a money, wouldn't it?

Paper certificates may work (And could also be used for bitcoin), if the banks which offered them were transparent enough.

Also that money as debt thing says that commercial banks create money which is not true. They lend out deposited money. The central banks create the money supply.

It hardly needs to be more scalable, it's never going to be the new way of small purchase transactions like VISA, but I think the larger investors will trade the big dollar amounts more frequently than the average McDonald's purchase.  There is just too many people using the US dollar to make a serious dent, but you could probably pay off your VISA with bitcoin money.  I think people will be using bitcoin as a tax-free bank more than a means of payment.

For Pennies /other small change, yes, Copper would work well, and actually, at this year's porcfest, a guy was selling copper for bitcoins or 'worthless paper'

I'd stay away from paper, save for large transfers (checks).

That's not quite true. Due to the fractional reserve system, Banks only need to have 10% of their loans in deposits, so they create a lot of 'spreadsheet' money when they loan. Technically, this money disappears when the loan is paid off, and the bank keeps the interest.

I don't know much about this. Is it money created from central bank deposits or is it really banks creating money out of thin air? So the money don't not exist in the bank system at all until they create it and this is deemed as legal?

The vast majority of money is created when the fed writes a check to the Gov't to extend their loan (billions at a time).

Then a similar situation happens with banks. It's not nearly so bad as the video makes it out to be, but yeah, it's a pretty hairy system.

it is reasonable to think of it this way.

when the Fed increases its balance sheet from $800 billion prior to the crisis to over $2.8 trillion today, the difference represents "printed" money which went directly to the banks in exchange for the toxic loans.  the Fed told us they were "lending" this newly printed money to the banks until the loan values recovered.  well they never have and if you look at their balance sheet, you can see that the "loan" has mysteriously changed into a "buy" evidence being the Repurchase Agreements being zero and the Securities Held Outright having ballooned.  we the taxpayer are now responsible for paying off this bad debt.

the other half of this same ripoff is evidenced by the "Excess Reserves" which is at about $16 trillion now held by the banks that they were supposed to lend out to the real economy.  well they never have b/c they know the avg American can't pay it back b/c of the economy being in the sh*tter and the fact they can earn 0.25% by just leaving the money at the Fed.

Could this mean that Bitcoin might survive and even thrive in spite of a major global disaster?

Assuming an expansive cellular network is built up rapidly following the event.

Can you direct me to something which explains this in full? I've only been aware of commercial banks lending out deposits and not creating new money.

Google creating new money (http://www.google.co.uk/search?client=opera&rls=en&q=commercial+banks+create+new+money+when&sourceid=opera&ie=utf-8&oe=utf-8&channel=suggest#sclient=psy&hl=en&client=opera&rls=en&channel=suggest&source=hp&q=how+do+commercial+banks+create+new+money&aq=1m&aqi=g1g-m1&aql=&oq=&pbx=1&bav=on.2,or.r_gc.r_pw.&fp=d5fb95a09e39d0e2&biw=1512&bih=857).

I'm still missing the part where it says "commercial bank creates brand spanking new fiat money", rather than "commercial bank increases deposits by allowing borrowers to borrow existing deposits and then deposit these and so on".

When you view the money balance on your bank account, it is not money there for withdrawal at any time, under any circumstances, it is which money owed to you which is not there for withdrawal at any time, under any circumstances.

Under a 10% reserve banking system, let's say you deposit $100. The bank is allowed, legally, to loan out $1000. That extra $900 is created out of nothing.

That isn't money, that is debt, which is financed from the excess reserves which exist as money.

Keeping to the US as an example, If the money supply counted all the dollars in existence, how can a commercial bank increase those dollars? They can't, can they?

In the US (and everywhere else with a central bank, which is... everywhere), Debt is money. Even the money created by the FED (Itself a private bank, not a government agency in any form of the word - it's as federal as FedEx) is debt, debt that the US government has taken on.

Can a bank loan out more than it has in loanable assets with out creating these assets out of thin air?

https://secure.wikimedia.org/wikipedia/en/wiki/Fractional_reserve_banking

To all those rapping on sociability, your right, Bitcoin could not handle the transaction volume of the entire world if we changed overnight, but that does not mean it can not. The Bitcoin protocol is fully capable of scaling to that level if you give the devs a couple of years to code for it. Most of the problems already have solutions that simply need to be implemented. And while that implementation may take a while it is far from impossible.

Quote the part which explains what you are going on about.

Is the so called "money creation" from commercial banks the same creation of new money from thin air the same type as from the central bank?

One of the many straws that broke the economies back was SEC chairman Cox getting rid of the reserve requirements for banks which before then was set at 15 to 1. This had two effects, it allowed the banks to leverage themselves to the hilt, it also made it harder for interbanking business, as before you knew the bank you were dealing with was pretty much using the 15 to 1 limit, when it went away, you had no clue if they had reserves or not.

Now they are building back up reserves to prevent this from happening again.

You can bitch about them not lending, but you really cant complain about reserve requiments because the lack of reserve requirments is why they had to be bailed out.

Bolded section is the most important. If you add the account balances up, and include the money that is loaned out, you end up with a total much greater than total deposits. Effectively, they have created money. It's not, however, directly the same as the thin-air creation of the Federal Reserve.

Bank balances are not money. I do not consider my bank balance to be money, I do not consider my debts to be money.

Bank account balances are what the bank owes to me. Wether or not they have it, is another question.

It comes down to what you define as money. I do not consider today's fraction reserve banking to be creating money our of thin air. It does however increase loanable funds, places risk on depositor's wealth and places more money in circulation.

Reconcile these two statements.

So, if I put my money into a savings account, according to you, I am decreasing the supply of money?

As you see, it depends on what you mean by money. If money is saved, is it no longer money?

No, it would seem that's what you're claiming.

You say more money in circulation is more money full stop, no?

I should note, I am not defending fractional reserve or anything, it's not at all good that fractional reserve dominates the banking landscape.

Particularly when that money is still, technically, in my bank account, as well.

I deposit $1.00. The bank loans out $0.50 of it, but I still have that dollar in my account. That's $1.50.

You don't need a degree in economics to see that they're mucking about with the finances.

It's a good thing Bitcoins are divisible to 8 decimal places :)

what you say about Cox is absolutely true.  except the part that he was a paid lacky for the financial industry and the banks wanted him to remove those constraints so they could gamble recklessly.

the problem is they're using taxpayer money to build up the reserves they need to withstand the next sh*t storm.  i say instead that the Big 5: GS, JPM, WFC, BAC, C get liquidated instead to remove the cancer from the system.

When they loan out 50¢ that isn't there anymore. Your account balance might show you one dollar but it's not money. It's what the bank owes to you, if they have it. There is still only 1 dollar.

I think we have the same understanding, just a different take on terminology.

What I'm wondering is if the commercial banks can get away with adding new electronic money. Maybe the commercial banks have a deal with government to create new money behind the scenes. Maybe there is too much risk of such a scam being revealed so maybe not.

True enough, as far as it goes, but I think I have a dollar, and he has the 50 cents, so what the 'market' sees, is a 50% increase in the supply of money.

I, for one, have some fraction of my net worth hedged on this possibility.

I expect that PM's would serve a similar function and be more reliable, but the proliferation of body scanners, divisibility issues and such render PMs a less flexible form in some scenarios.

I figure I have another 40-ish years left and suspect that it is more likely than not that we will experience a global financial disaster sometime within that time frame.  Or at least one in my country.  I guess I would reserve the term 'disaster' for something which would be unexpected.  In my mind, what I am expecting is more of an 'expected reset event' which is baked into the cake for all debt based monetary systems.

What limits the computational power? The number of GPUs available, or the power available to drive them?

Swing by newegg and see for yourself. ;)

I think the key is even though the $1 is just a debt the bank owes you, you can spend it as if it were money. All those bank transfers to BTC exchanges are just monopoly money  ;D

If you tried to transfer more than the bank had, you couldn't unless banks really are creating new money.

Exactly....

Though in practice it's more of a juggling act than actually creating more money.

You could transfer bank balances across the bank but not from one bank to another without having money behind it and especially not withdraw it.

Yup, more juggling.

Though, when you're just shifting numbers around, it's relatively easy to allow negative numbers.

The world could easily run on bitcoins for major transactions. We could go back to using precious metal coins for quick everyday spending.

You do know how to get a man's heart fluttering.  ;)

Taking money from an account with zero and giving it to another account, thereby creating new electronic money from an account with nothing (Now is negative). Or rather taking from an account more than is there so it is negative.

Well, while this would be illegal (Unless it is allowed by law to a great surprise) I wouldn't be surprised if banks did do this since it's just electronic money. Clever bankers could find loopholes in the system to generate new money without anyone finding out. New money which could go into bank profits.

Or would they risk counterfeiting money? If they got found out, wouldn't it be really bad? Especially in the eyes of the public.

But the system od electronic fiat money is so screwed up, that I'm sure at least someone has abused or is at least trying or tried to abuse the system.