Bitcoin Forum

Now this guy is talking scary shit but even more scary, will governments think it's maybe a good idea.

"There's An Electronic Currency That Could Save The Economy — And It's Not Bitcoin"

"University of Michigan economist Miles Kimball has developed a theoretical solution  to this problem in the form of an electronic currency that would allow the Fed to bring nominal rates below zero to combat recessions. He's been presenting his plan to different economists and central bankers around the world."

http://finance.yahoo.com/news/theres-electronic-currency-could-save-121228399.html

Such a currency already exists, it's called Freicoin. ::)

Great idea!

Then on the one hand there is the e-dollar that loses 5% of its value, probably on top of inflation. On the other hand, there is bitcoin, a digital currency without inflation.

Hmm, which one to pick?

Did you read the article?
Freicoin is decentralized much as in the same way as Bitcoin.

He is advocating a CENTRALIZED (government/Fed) run e-currency.

Yes I know, Freicoin is not centralized. Obviously they are not the same. But it's covering the aspect of negative interest, I think it's fair to say that most people don't really want that.

Oh, one more thing to add to the mainstream economics and Cunicula's crystal ball thread.

https://bitcointalk.org/index.php?topic=125822.0

Edit: Oops, actually this is more than a year old. So I should have linked to him, not the other way around.
http://qz.com/21797/the-case-for-electric-money-the-end-of-inflation-and-recessions-as-we-know-it/

I'm with Freicoin and I don't take offense here, Birdy might have been a bit more clear on the differences but hey no news is bad news.  We are quite pleased to see that the negative interest concept (demurrage) is percolating into the mainstream economic discussion.   Even a centralized demurrage currency would be an improvement over current national currencies.

As for 'most people' not wanting negative interest, this is an appeal to the crowd, a classic logical fallacy, no self respecting libertarian (which most of you here on the forums claim to be) would justify a "rob Peter to pay Paul" scenario simply because most people want it.  The question is is it FAIR and is it GOOD for boosting Economic activity.  We have a compelling argument for both of these points, and we argue from a universal position too, not as Kimball dose which is to argue that negative rates are a brief or temporary fix for the current recession.

Now if you want to say that no one is interested in SPECULATING in FRC because of it's negative interest, this is partly true, but that is by design.  And we are pleased with the results so far.  FRC is designed to be a medium of exchange first and foremost, where as BTC is designed to be a store-of-value first and foremost.

I'm glad you didn't.
While personally I don't think demurrage will be a successful idea, I think it's an interesting experiment and one of the better altcoins.

I admit that I don't see what advantages this hypothetical demurrage currency would have over traditional money or bitcoin such that people would willingly use it. It seems to only make sense if it were impossible to use other forms of currency, i.e. if all other currencies were made illegal.

with a maximum of just....trillions of coins...and pre-mined :P ? china will love that.

@Impaler and Birdy I am pretty much happy with any monetary system that treats everyone fairly and consistently and is not corrupted by bankers and politicians.

Maybe I am misunderstanding the concept.

How is this different from printing more money?

Either way, the individual unit loses value.

i really dont get it.
the dollar, majority of it is already "e-currency" just a ledger in a bank. i don't get the push for currency to go digital when most of it already is

To the original poster:

You're surprised?

Bernanke likes Bitcoin, not because he likes Bitcoin, but because he and everyone else in the Govt is planning to make their own.

That's why they never say they endorsed Bitcoin.   They only said that "the technology" is something that could be extremely beneficial.

As everyone in the Bitcoin community has already proven, any tom dick, or harry can make a new cryptocurrency.

I warned all of you about this a long time ago, because all you're doing is showing the Govt that they can easily make their own.

But hey, everyone wants to get rich, so now there's nearly 100 alt coins.  Woo hoo!  :/

Anyways ... old news ... Govt doesn't love Bitcoin.   They plan to make their own.

Trillions of dollars could be saved if the Govt switched to a cryptocurrency, and they're fully aware of that.

Trillions upon trillions.

Is there a thread about the mechanics of getting people to use it?  Sounds like getting kids to ask for veggies instead of caek -- a good thing, but unlikely to happen.

the canadian government has already started: with mint chip. http://en.wikipedia.org/wiki/MintChip

but whatever the government try to implement, it's going to be inferior to what the free market can produce. and of course, they only want it so it can be used as a further form of control. the narrative will be: it helps in the war against pedophiles, terrorists and drug dealers.

The key concept here is that there is an exchange rate between dollars and e-dollars that it can be set in such a way that the e-dollar can face negative interst.

What it doesn't makes sense is that for the negative interest rate to affect the paper dollar i must convert my paper dollars to e-dollars?
Why should i do that? I mean even for internet transactions i will use a paper dollar funded paypal instead of converting to e-dollars.
So they must either force people to convert at some point or paper dollars must become obsolete?

Obviously there are technical reasons that it will not work.

Bottomline: More Pr for bitcoin

I'll take the store of value any time.

Enough with banksters and governments robbing me one way or another because Paul took (or was given, whatever you prefer) a shitload of loans which he can't pay.

PS: Peter here.

I really hope they take it seriously and implement demurrage in the USD.  That would send people to BTC in DROVES.

so fiat electronic currency.. right, people will be totally excited about "more of the same."

The Chicago Fed's recent report (pdf (http://www.chicagofed.org/digital_assets/publications/chicago_fed_letter/2013/cfldecember2013_317.pdf)) on bitcoin did allude to building in some of the bitcoin's crypto transaction security properties into the dollar bank-payment network eventually. Obviously that would be more of the same monetary dynamics (fiat), but with better transaction security. That's fine...

The ultimate allure of bitcoin remains two-fold:
1) A credibly limited-supply, perfect-information, currency/monetary-system controlled/manipulated by no one.
2) A new protocol for value on the internet, on top of which many new financial services can be built.

The potential future existence of FedCoin does not detract from either of the above in any way.

This economy does not deserve to be saved.

It's a centrally-planned murder machine designed to enrich Manhattan and DC while bribing the Baby Boomers with the auctioned-off livelihoods of their grandchildren.

Demurrage vs. deflation...

That's sort of like a bear wrestling a midget. Do they want to kill the dollar faster?

I'm affraid that elite, seeing they are loosing battle, don't make just a little bit more fair digital currency compared to nowadays fiat, but still centralized, and use all of their media and political power to promote it as a new-world currency.

Seems this is yet another excuse for centralization.  It's also a kind of digital currency implementation of Keynesian Economics.  It is similar to Demurrage, and thus similar to Freicoin.  Personally I don't think that demurrage is a useful concept.  The moment Freicion is released, someone will build an exchange and people will cash out of Freicoins instantly(why would you want to hold them if your balance depletes?).  Thus the only people left holding Freicoins are the issuers.

Demurrage has been tried many many times, but the Legend of Demurrage persists...  the idea is over 100 years old.

Everyone please stop freaking out and just read the article. The scheme that this guy proposes has exactly 0 similarities with freicoin.

As i said before the key point is the exchange rate between dollars and e-dollars

Ow they're going to create another DOA crap altcoin, well I guess they can post it in the alt forum when they release it, lol.  :P

The article never gets into what makes demurrage money better than plain old inflation (as in printing moar dollars, what the folks on this forum hate so much).  There are differences (like who gets the crisp new bills), but the article doesn't even touch on that.

It is a common misconception that demurrage is identical to inflation in it's effects on the economy.

Inflation always has a distinct negative effect caused by the slow destruction of the unit of account value of money.  Anyone with a basic economic knowledge knows that prices are the means by which a Free market so efficiently allocates scares resources, everyone is continually communicating their desires for goods and the availability of goods with prices when they make a purchase or set a price on goods for sale.  Inflation is always eroding the quality of that information, it is like packet-loss on your internet connection.  Low levels of inflation do not cause a terrible collapse mind you but they slowly invalidate all our old prices.

Note that Deflation is EQUALLY destructive to price information, prices only care about the absolute magnitude of change not the sign.  BTC hyper deflation is so bad that no one attempts to use BTC as a unit of account AT ALL, goods are prices in dollars and the spot exchange rate is used to determine every purchase, exactly as would be done in a nation with Hyper Inflationary currency that has some black market dollars in it that everyone uses as the unit of account.

The reason we have inflation at all is to keep money circulating, demurrage accomplishes the circulation without the destruction of price information.  Thus we can conclude it is a superior implementation.

all good except we have big inflation still in bitcoin. Adoption phase make price go up and down wildly.

I'm still not seeing a difference, possibly because we haven't agreed on the terminology.

a) Here's my definition of "inflation" (inflationary money) in this context:  A currency similar to today's fiat, where more money is constantly released into circulation.  Bitcoin also meets this definition and will continue to meet it until all 21 million coins are mined.

b) "Inflation" is also used to describe rising prices of goods, when the gallon of milk which cost 1 dollar on Monday costs 2 dollars on Tuesday.  This is also a correct definition, but has only a circumstantial link to "inflationary money" -- it can happen with a deflationary currency as well.  So NOT the one i mean in this thread.

Can we agree which definition we're using & is there a way to highlight the essential difference between an inflationary economy & one where demurrage money is used?  (a real question)

I would definitely be excited about it, especially if the transactions were irreversible.  It could make it much easier to exchange your fiat for bitcoins and vice versa.  Imagine if both parties of an exchange could send their currency to escrow.

What's scary is that if some other online currency REALLY took off with the uneducated, it could kill bitcoin...  This would mean that a lot of people wo uld lose a lot of money

How could they save the economy by introducing negative interest?  Negative interest means more inflation, and all those money will go into bitcoin to hedge that risk. The only demand left is money and saving, everything else has already been built.

No economist (not even Von Misess) would agree with your A definition as Inflation, your just describing growth in Money Supply, where as even the most hard core Austrian would define Inflation as a growth in money supply IN EXCESS of the DEMAND FOR MONEY.  I know that lots of BTC people CALL growth in Money Supply Inflation but it is not, when I say Inflation I mean your B definition. 

But in any case if a growing money supply is something you dislike then you should like FRC because our money supply reaches it's cap in only 3 years (2 left to go), not some absurd 100 years in the future when we are all going to be long dead.  We can do this because we don't have to wean miners off of new coins and onto a full dependence on transaction fees, the demurrage recycling provides a ongoing revenue stream.

We could still have gone for some absurd 100 years of money supply growth, but we wanted to actually be the first and ONLY coin to reach a stable money supply.  It is an experiment and no one has any idea if Crypto-currency can actually survive without a growing money supply or what kind of effects it has on the economy and valuation so one way or the other we will provide a data point on that question.

Personally I don't think a flat money supply will work (deflation will result and interest rates will not fall to 0% which is our ultimate goal) so I am glad to have an experiment that can uphold or refute this position within my lifetime and in time to guide the future of crypto-currency while it is still in it's infancy.

Well and succinctly said.

Not if we use Impaler's definition of inflation, ("I know that lots of BTC people CALL growth in Money Supply Inflation but it is not, when I say Inflation I mean your B definition.").  Using his definition (which is the more common one outside outside of this forum), bitcoin economy is experiencing *deflation*. 

For such a currency to take off it must provide something trully innovative over bitcoin. So far it seems that's not easy to achieve.

Agreed. This would secure Bitcoin as a world standard and reduce USD to something even Robert Mugabe wouldn't touch.

Oh and this guy's currency idea is the biggest crock of shit I've heard for some time.

I don't know why banksters and Keynsians feel that economic activity and consumption are the main goals.

The goal of money should be to enable fruitfull economic activity and individual choices re work and consumption, not to get all us serfs running on the hamster wheel faster and faster to keep the banksters happy on their yachts snorting coke whilst using polluting the world even more.

</rant>

... yeah, best to just tell the prof. dude to post it in the Alt-coin forum and see how it flies in the free market (no pre-mining scams either please prof.)

One more thing, why do all the banksters steal our wealth, time, industry and pensions at the same time as telling us it's the 'free market'. Free market my arse.
I change my mind about this crappy coin idea - I think USD should be changed to 'shit-crap-US-e-coin-schmoin' with no exchange restrictions on bitcoin.

Western govts should accept taxes in their local 'inflation-demurage-shit-coin' .

See what the frikkin 'free market' decides it likes best then.

 >:( >:( >:( >:(


'Think happy thoughts' - 'BTCBTCBTCBTCBTC'  :) :) :)

From my reading of all of these statements about governments and financial institutions moving to "virtual currencies" it really seems like they don't really understand the technology.  They're all focused on speed.  The real innovation that underpins bitcoin (a decentralized consensus network) isn't needed to make the current system work faster, and that's what most of the government and traditional banking types think is the big innovation bitcoin brings to the table, just speed.  It isn't, and any computer scientists knows that.

The existing financial system can be made faster by changing some of the rules about how ACH works, for example, and by upgrading computers in a data center.  Whoopdee do!  That hasn't been done yet because it'll be kind of a headache.  But, doing it doesn't rely on any of the technical innovation behind bitcoin.  In short, they've completely overlooked what exactly is innovative about bitcoin.  And that property of the protocol is what makes it potentially so disruptive because it can be used for more things than just a means of exchanging value as in a currency.

Just look at this article (http://touch.latimes.com/#section/-1/article/p2p-78297352/) in the LA Times.  He thinks the real fancy technical innovation has to do with speed and how they're created.  Not that the whole system is a network of computers distributed globally coming to consensus about what transactions are verified and when, and is doing so without any one giving telling them what to "believe" - and their consensus can be trusted and verified by everyone using the system.  Nope.  It's faster than ACH and checks and the money supply is limited.  He does not understand the system.

Beacause they can?
The ignorance level here is over 9000 >:(

And the reason they can is because of INTEREST, money has a liquidity value which accrues unearned to the one holding it.  People can then monetize that value by loaning money at interest, the rate of interest will reflect the market valuation of the liquidity value, that is how banks make money.

Demurrage sterilizes the liquidity value of money, the liquidity is now being paid for by the person holding money, they have no surplus unearned value to sell.  People will still loan money but it will be at 0%, the loan maker will lose liquidity but stop paying demurrage, the loan recipient will acquire liquidity and begin paying demurrage.

I'm with you on this (the interest part), what i don't understand is how demurrage would be different from simply inflating the money supply (like it is done with fiat).  I am also having trouble coming up with plausible scenarios where people would voluntarily adopt such a currency.
The egalitarian part of me likes it -- it would be great for the poor & discourage hoarding, but so is inflation-done-right.

I didn't actually want your opinion.

Their are two halves to 'BTC' the basic block-chain cryptographic 'tech' part and the layer of 'currency' built on top.  When people like Ben Bernanke see value in the tech ONLY it's because they the so called 'currency' layer is an unsustainable scheme with no value in their eyes.  They just aren't interested in popping anyone's fantasy because one, you folks would all dismiss them out of hand if they degenerate BTC as has been done to every intellectual that has done so, and two the currency is really just a spec on their radar, if it becomes a bubble big enough to threaten the economy then they might care.

Did you read my reply in another thread concerning Price information and how inflation/deflation over time destroys this information flow?  That is a major part of the equation for demurrage over inflation (and the one I bring out first as Austrians generally except the importance of price information), but their are other points as well but they are a bit more complex.

In the classic 'quantity theory of money' the equation MV = PQ (Money Supply x Velocity = Price Level x Quantity of Goods) is going to hold true IN THE LONG RUN.  But in the short run a central banks increase in M may not go directly into an increase in P, it may (as it is now) result in dropping V as the money becomes 'stuck in the Banks'.  Because their isn't any inflation YET, no one is interested in loaning or investing and thus the money never gets out to cause the inflation desired.  You see normal Banks actually create most money by credit expansion they stand between the Central Bank and the actual inflation rate in the economy.  

Central Banks have a high degree of control on Interest rates by controlling the bond markets and thouse rates go right out into the economy to encourage or discourage borrowing and investment, but they have only INDIRECT control of inflation rates.  Right now the FED has a 2% inflation target but inflation is failing short of that, in contrast the FED just PICKS the interest rate and sets it practically at Will (smaller or indebted nations may not have that degree of control mind you but the FED dose).  

So because inflation/deflation in actual prices in the economy is so indirect, being after all a dynamic arising from the gradual bidding up of prices as consumers have more money in their pockets to spend with the effects of a central bank have a lot of lag.  The economy may need higher prices and higher velocity right now but money supply expansion could take months or years to reach the economy and it would continue to have an effect long after the need is gone.

A Demurrage rate though has the EFFECT of Inflation but moves at the SPEED of Interest rates allowing it to be far more responsive then even the best managed Inflation targeting.  Now in FRC we don't have the ability to adjust the rate of Demurrage (no technical solution and no willingness on our part to take the responsibility to set it), but a nations central bank WOULD use a dynamic rate, really it would just be an extension of their interest rates so this would allow them to be a better central bank.

On a side note I've speculated on a means to created decentralized demurrage rates in Freicoin, the general outline I have is that their would be some kind of internal bond-market / prediction market operating inside the block-chain that all clients can participate in, the result is then used to modify the demurrage rate.  Something similar might control Money Supply as well but it's all VERY complicated and just a bare theory right now.

This is pretty neat, especially the last part (variable demurrage rates).  I'm having a hard time picturing how it would be possible to implement algorithmically, but it doesn't seem outright impossible.  If made to work, it would be pretty elegant.  Is there a thread (i won't post -- just read) or a white paper you can point me to?  I'll re-read your post later, maybe i'm reading too much into the "self-correcting demurrage," but it's an interesting way of seeing money as a self-contained governor of economy. 

This thread on our forums is where I did most of the brainstorming, ultimately I wasn't satisfied with any concrete design, but I think the general concept is sound.  Part of the problem is untangling of liquidity premium and inflation expectations.  This means that two inter-related markets are likely required.  Also their are risks that users could game any markets to get results that don't reflect the real values involved but I think having people put 'skin in the game' will help prevent that, skin being the coins involved. 

I do not believe it is possible to get any kind of 'normal' exchange between national currency and crypto-currency to work inside the block-chain, people have speculated endlessly about that but the problem is you can't compel the delivery of the real assets by recording something in the block-chain, possession is 9/10th and all.  For the same reason all the 'smart property' ideas are DOA in my opinion, thus I've limited my designs for these markets and auto-adjustment system to only taking purchases/wagers etc in the chain coins and other chain enforced tokens, in a sense it would be completely self-contained.

http://freicoin.freeforums.org/decentralized-auto-adjusting-demurrage-t51.html

http://www.scribd.com/doc/186071279/Hop-System-for-Store-of-USD-Value
You guys might look at the slides linked above which describe a design with variable interest rates.

Bang on the money on both counts.

The sooner the USD collapses, the better. It's a decayed, rotting corpse that should have been buried long ago. Let it go and let's move on with rebuilding from the ashes of the fire the banksters lit.


Oh, that's an easy one... It's the only way they know how to rob and steal from you. :)

---

As for the currency in the article... Idiotic idea. It has zero benefit for the people using it. "Oh, but... the greater good..." To which the appropriate response is "f**k off". The greater good is never served by sacrificing people.

In other news, I'm selling suicide machines for 10 BTC each (special today of 1 BTC - just mention the special code "MASOCHIST1"). Send payment to the address below then PM me. Hey... if people are silly enough to buy into proposals like the e-dollar, I could get rich off of my suicide machines! Though I do wonder how many e-dollar users will also be my customers...

It doesn't matter if one government likes bitcoin or not. It is the market that will decide in the end. Don't underestimate the free market.
Also when you say that a government has any reason at all to introduce their own crypto coin it looks like you don't understand what a crypto coin is.

Thx for the link, this guy solution looks untenable for the reasons I described above, but he is at least on the same continent as I am in the goal he is aiming for.

Well you might click on the link before arriving at a judgement.
If you had, then you would have written "your solution" instead of "this guy solution."

Or not, up to you.

The moment the gov creates an alt coin and it advertise you can pay your taxes and it pays it's own men with that new crypto..
bitcoin users vs govcoin users 0-1 mil.
 

what scares me are the logical consequences this would bring since nobody would use this crap voluntarily.
- make cash illeagal/severly restrict use*
- controll and limit exchangeability into other currencys
- limit purchase of precious metals

*or do something like printing a date on it and/or selling tax stickers

You can do that already with fiat and visa and paypal. You don't need an altcoin.

You know what this thread it's all about ?