Bitcoin Forum

It's amazing how I read this all the time, but it makes no sense.  

How does the USA back the value of the dollar??   There is no gold standard any longer.  If there is hyperinflation and your dollars become close to worthless, what do you think the US gov't is going to give you to "back up" your dollars?  

They aren't going to give you gold.... land..... or even more dollars...they aren't going to give you anything.  Maybe an insincere "sorry, we screwed up" but most likely not even that.

Am I missing something here or are people who say that just as dumb/clueless as I think they are???

Its not really dumb, its just a lot isn't taught in schools.  Not a lot of people can answer "where does money come from?".  Banks generate cash flow through loans, and 80% of money is debt.

US Dollar, the representative of the financial/economic aspect of this nation, is backed by the political, industrial, military, and national will of the United States. As is any other national currency on earth.

It belongs to Americans, controlled by Americans and American government, and those whose identity and loyalty is American.


Same goes for any other national currency on earth. It's a means to project your own economic and national abilities and representations of your interests with others based on a coinage/currency that is ultimately based on your will and abilities to make influential through having something to offer.

In the case of United States, that 'something to offer' is vastly greater in terms of raw power, population (remember, after population anomalies such as india and china, US has the highest population among 'normal sized' nations with pop estimated to reach 330 million within early this decade), industrial background, resources, and willingness to fight.

Also, contrary to what every fool says about 'well your currency collapses and you have nothing' - that's a fool's delusion. Remember the three triad of power: Influence (charisma, abilities to persuade and influence others with your will and beliefs), Wealth (something real and useful that can provide material backing), and ultimately, Violence (the will and capability to wield the power to kill and overpower your enemies). Just because you weaken one aspect of that doesn't mean the other is completely helpless - on the contrary, having just one gives opportunity acquire and invigorate the other.

In essence, American identity and ability to achieve results gives it confidence and trust, not to mention relatively stabilizing influence American backing has on majority of nations that allied with America post-ww2. The will and intent to use power to not only benefit itself but to reinvigorate another, compared to other outright domination-inclined states such as china (events in south china sea and around its borders made china's intent clear to any of its neighbors) is what give American Dollar it's backing.

You are missing something. It's called understanding of power and competent usage of such power. My confidence in my nation would be shaken if we tried to having a pissing contest on the international stage over a piece of rock due to 'historical ownership' or some such bull shit.

Influence, Wealth, and Violence. Will to use these factors and driving force of intent as an American. That's what makes the dollar what it is. Same with every other nation on earth. Currency is but a representation of one of these things.


Edit: Also, the fact that America is relatively speaking geographically separate from the rest of the world (sans canada, but we also share the longest demilitarized borders and are practically one in the same, realistically speaking), and therefore makes for an attractive ally, even though its power is more than capable of spilling over its borders. This is due to the fact that having US too close is like having an elephant in the room - no matter how gentle and well-natured, you will feel its presence with every twitch and grunt. However, Since most of the rest of the world is separated from US by two great oceans, this natural risk of overpowering due to size of power by a nation in close proximity is reduced (compared to china and its neighbors). However, US is also perfectly capable of projecting and extending its power across the globe if its purposefully wills (11 carrier groups with plenty to reinforce them, 22 amphibious groups and marine expeditionary forces for a start). However, they will not be called upon unless someone expressly wills it so, as opposed to naturally spilling over. Consider the fact that  nations are in conflict simply due to interferences upon each other by nature of their proximity.

Therefore, coupled with the fact that you will have the backing of an influential and powerful nation with little side effect of having such power too close, and the fact that any 'intervention' can only be achieved if US purposefully wills it outright (once again, reducing the natural unintended risk of having something in your living room as opposed to next town over), and you have a very ideal position to become a powerful and influential backer.

Hence, the economic strength of US dollar in one aspect.

Bottom line is USD is ultimately backed by force, by guns, if you live in the USA and you have wealth you need USD to stay out of prison, pretty powerful backing if you ask me, people tend to value their liberty a lot , now you can argue that initiation of force is unmoral all day long , but it is what it is.

Bitcoin is backed by market demand only, all of us promoting it because we believe in it's value as a currency, but this believe is not as rock solid as the power of the US government to force people to use the $

I suppose to you I am forced to steal from jewlery shops because they display wealth something I don't have.

Or maybe I am 'forced' to use USD because I would definitely use fucking rmb or euro instead if I don't want to go to jail in US.

Get over yourself. Always bitching about how you are 'forced' to do something because you are incapable, when that 'forced' party is practically offering gold for 1% of your time on yearly basis. 

Well if you know of a way to not pay taxes and not go to jail  , please let me know  :)

If you know anywhere a nation that doesn't prosecute you for not paying taxes, you let me know too :)

In the mean time, try not use gas, electricity, public road, public transportation, and public park, not to mention water and sewage either. You hate things provided by the tax dollars, I think. So funny of you to not take such things seriously when you are sitting pretty bitching about inconveniences in your developed world mentality.

It's like Paul Krugman said the other day, "Fiat money, if you like, is backed by men with guns."

Give me something influential that ISN'T backed with some form of force and I will sell you that bridge in brooklyn.

I am not bitching about any of those thing, I just explained how the USD is backed by taxation, by force, whether we like it or not, while BTC is backed by market demand only.

In it's entire history I'm not aware of the dollar ever collapsing in value. 

Unlike 3rd world countries, the US has a very good track record in keeping the value of it's currency.

Yes, the dollar has a reasonable rate of inflation (unlike 3rd world countries) but that is not the same as a collapse in the currency.


___________________________________
Get 420 with bitcoins at zeltasgarden.com

Which is why it will be ultimately subordinate to some form of authority and force.

Because DPR had such a 'market driven demand' that saved him from the feds for drug dealing and attempted contract murder.

what it means is that if the dollar fails, the fed will continue to print more and more money.. and that is why fiat is so much better. apparently.

While it is never perfect trying to say 'that's the way things were, it will continue to be', those who don't even have that much of a track record should watch their mouths before bitching about 'hurrrrr collapse of dollar huuuurrrrrr'.

For every dollar America owes to the world, they owe about 0.9 dollars back. Since interest rates on average is higher for American-owned foreign debt, we are at the very least breaking even on an yearly basis - hence the economic growth of 2.5 this year which is rising.

I wonder how many people are aware the world owes money to america as much as US owes them. Not to mention all the foundation of global economy runs on American will and backing. If America were to back out of global economic engine, the ENTIRE WORLD will fall into long half-century severe depression, with America experiencing recession, from which we will recover within 10 years.

China? Their economy is in the end too dependent on concentration in the hands of few, much more so than America, not to mention their attitude makes enemies of their numerous neighbors. Not to mention they really haven't weened themselves off of export trade based economy by any stretch of imagination because relying on domestic market means redistribution of wealth, which means more voice to the common people - and aspect HATED by upper rich class in china. More to the point, their culture is too child-like in its mentality to act a leader. The old saying, 'China talks, no one really listens' has a real basis.

The utility of the US dollar as being used as a currency is backed by the US gov't, but not the value of the currency.  What is the use of being able to legally spend the USD if it isn't worth anything?   People discount the effect of inflation on their money, and especially the possible hypter-inflation. 

And of course BTC doesn't need to be backed by anyone to be used, although certainly it may get to the point where it is illegal to transact with it.  That will slow it down of course but won't stop it.

Huh?  The USD has lost something like 97% of its purchasing power since it was introduced.  

yes 97 % in 100 years or something ever since the FED was introduced

Of course, no other currency has been debased over that age 100 times its original value.....or 200.....or 1000...or even survive....

LOL

BTC is backed by the laws of mathematics and the power of cryptography.

USD is backed by the 'full faith' of the US govt.

I sure as hell know which of these two I trust more.

only the supply side is backed by mathematics and cryptography, demand side is backed by market demand only, by all of us believing it is useful as a currency, without demand BTC is worthless no matter how rock solid it's supply is

That's not the kind of backing we're talking about here. Is the demand side of the USD backed by the US govt? No, if there is no demand, there's no button the US govt can press to magically create or enforce it. Sure they can attempt marketing, political P.R. and propaganda but in the end, nothing is guaranteed. So much for "backing".

Yes it is, demand side of the USD is backed by the US government through taxation, as long as everyone living in the US can only pay taxes in USD everyone will need to hold USD or go to jail

Yes exactly...and a good example of this is that during the 1930s, people didn't value their USD enough, so FDR made it illegal for anyone to hold gold and all US citizens were ordered to turn in their gold to the federal gov't or face possible prosecution.   This was done to prop up the dollar because the "demand" wasn't enough.

This is what the full faith and credit of the government looks like, in real life.

https://en.wikipedia.org/wiki/Executive_Order_6102
https://upload.wikimedia.org/wikipedia/commons/thumb/a/a1/Executive_Order_6102.jpg/220px-Executive_Order_6102.jpg

I hate to spoil the party but the "US Dollar" in terms of the Constitution of the United States and its Treasury Coinage act ceased to exist in 1913.
This is when the Federal Reserve Note was introduced that replaced the US Dollar (although alot of effort was put into keeping the name despite the drastic changes that this transition caused).
The US Dollar in accordance with its original Coinage Act was real, actual money that still retains its value today.

The Federal Reserve Note is an IOU, a debt certificate (it's even printed on the paper in plain), legal tender and legally not redeemable in anything but debt of its own denomination.
It belongs to a private banking corporation called "Federal Reserve" or FED, controlled solely by its private owners and associates (the government, let alone americans have absolutely NO legal authority over it whatsoever - they borrow from the FED at interest) and is supported by those whose identity and loyality is for global central banking.
The Federal Reserve Note with the Federal Reserve Act of 1913 has lost >98% of its original debt value within the last 100 years, with alot more to come. Go figure.
By definition before 1913, a Federal Reserve Note would be counterfeit money and its creators would have been sentenced to death for conducting the capital offense of debasing money by the terms of the original Coinage Act of 1792.

That FRN, however, is backed by global central banking and the puppet governments they own - and they will rage war on anything or anyone that threatens its global reserve status and/or their control over it.

The value of the USD is actually backed by the US military. It is the force that prevents other nationstates from invading and wiping USA out of its miserable existence. No more USA = no more USD. Military defends government and allows government to exist, government says USD is money.

you're missing something.


by forcing taxpayers to make good on the debts of the US government.  How this is possible in the long term seems to escape most of our 'experts', who will be long gone when the time comes to actually pay.

Don't listen to people like Krugman who want to scare you away from using things like Bitcoin.

also did I mention we recently gave trillions of dollars to billionaires so they don't become poor?

that's somewhat true.  The military keeps the US take on 'world peace' intact, the oil flowing into the right barrels and the money moving into the right pockets, and the various areas that dont cooperate from creating viable economies.

http://www.youtube.com/watch?v=yTbdnNgqfs8

you should be VERY angry at these things.

yep, could very well happen again.

you can create P2P Gold Currencies using Confidence Chains:  http://www.altchain.org/?q=whitepapers/paper2.html

Let's hope rest of the world in their 'miserable existance' can learn to cope with their self-inflicted idiocy that drove them to that point.

Until they manage to get another saddam hussein in power.

Wait, that's not your fault? I thought you were supposed to be a sovereign nation, with sovereign rights. Maybe you only uphold it when US intervenes to clean up your mess.

Also, to OP: How does ANY nation 'back' the power of their currency? Answer that first.

The real question is, Could our military defend our land if china decided to foreclose for debts we owe them.
China has overwhelming numbers, any Chinese citizen could be given a gun and told kill or be killed.
China also has the ability to mass produce anything cheaply(weapons included.)
EDIT: China was the first to mass produce a weapon (http://en.wikipedia.org/wiki/Mass_production#Before_the_Machine_Age), and they are likely to be the last when they finally decide to take over the world.

bluemeanie1, You should really edit/append your posts.
Having four replies by a single person(with nobody in between) is nonsense.

How about no taxes?  BVI.  They have roads too! ;)

Live with your parents. Or own a home and rent it out to two or three tenants.

It always bugs me when someone tries to say that money is backed by something besides confidence.  It's a simple test:

Money in which everyone has confidence: the most powerful money in the world.
Money in which nobody has confidence: worthless.

A backing that is not itself confidence is just an extraneous layer of confidence, typically used to hide the shakiness of the underlying true money (i.e. fancy paper.)  Bitcoin doesn't need to be backed by math or trust in cryptography or computers, for it is these qualities of the money which give people confidence in Bitcoin; Bitcoin isn't backed by these qualities, it is backed by people who are confident in these qualities, among other qualities of Bitcoin.

With that said, it's semi-accurate to say that BTC is backed by nothing; because we only experience this world through one set of eyes, a person who does not exercise his intuition will be quick to say that BTC is, in fact, backed by nothing, because he has no confidence in BTC; clearly there are people who do have this confidence, but this does not affect the person who exists in a vacuum of himself or those who will confirm his bias.  Likewise, because said person cannot acknowledge what gives money backing, he misattributes his confidence in a currency as backing from Go--I mean, the state.  If the state says "it's good money", their worshiper will reflect this; whether or not it's true holds no relevance.

As another member said, it's not something taught in schools, so it's not surprise that people would say such a thing; but the argument that people are intentionally being kept in the dark is another matter.

Words.

Bitcoin is unbacked
USD is unbacked. Force does nothing here.

You are absolutely correct today we have a faith in USA due to which it is traded in financial market but in case of recession ultimately civilians holding currency shall be burdened with loss not government. So no currency is backed up these days either its bitcoin or USD 

The US dollar has lost around 95% of its purchasing power in the last 100 years.

In the 70's its value also dropped significantly with the rampant increase in inflation, I believe the value dropped around 60-70% for a short period.

But to add my 2 satoshis to the thread, the US dollar is primarily backed by trust.

It is trusted that the US will remain stable and not veer to far off the monetary course, that it will operate with the best interests of the economy at heart. Since WW2, the US has taken on the role of the global policeman. Yes, this role, at the most basic level, is reinforced by the size and capability of its army. It also used to be due to its industry although that landscape has changed significantly. The same cannot be said about other countries.

No one doubts the ability of the US to deal with any 'threats' to US dominance (also a part of 'trust'). Invasion of land for ideology (Vietnam) or resources (Iraq)has been a favourite but increasingly the wars being fought are economic (Venezuela, Iran).

Similarly, looking at the Sino / Japanese conflict over a small rocky outcrop in between the two: not so much about the damned rocks, more about economics and power. The real war being fought now is a currency war. The Japanese have abandoned the rest of Asia in a way and killed the Yen. This affects the export markets of China, Korea etc, so there is a lot of military flexing and posturing going on.

I don't believe China would ever go this way. The main problem for the Chinese govt is to keep its population fed and in employment for without that their power would be at risk. Imagine a couple of hundred million poor hungry people trying to make do. Dumping US Treasuries would cripple the US, probably also the world and definitely the Chinese themselves. What it looks like they are doing, is transitioning away. Deals with Europe, Australia and Russia that aren't denominated in US dollars. Buying gold. Buying farmlands overseas. China has traditionally been a country that wants to keep others out, but slowly it has relaxed its borders & ideologies, however it is a big jump to see it taking over the world anytime soon.

The Chinese Government would let them starve to death(possibly mass execute them?), then proceed as usual.
They would censor any criticism.

To me " Money " ( including bitcoin ) is just a " way " to complete something

It may be very surprising to believe but central banks actually make money out of nothing yep NOTHING .

The money from nothing is lent to high street banks at 0.5 %

In Britain every pound can be lent out by the high street around fifteen times .

Who eventually pays for this money ,us suckers, every single bit of it .It is called true inflation which is currently running at 10%.

Google = Re-hypothecation ,fractional reserve banking , for the 10% inflation check out food and fuel/commodity prices 2003 and compare to 2013 commodities .then come back and correct me .

Bitcoin is the peoples chance to fight back against banksters .

1) No re-hypothecation .

2) No fractional reserve thievery .

3) Deflation were stuff gets cheaper . this is the "garlic bread" of finance ,it is the future .

If people actually knew how the banks backed by government really worked there would be a revolution .

The funny thing is that I have not found a single hit on the word 'income' in income tax. Thing about it: why was an income tax instated round and about the time central banking was introduced in earnest. An excellent method to get people valuing that paper money. Those taxes have to be paid with fiat money after all.

The government's income (tax) is much less than the spending, how could they back dollar's value?

Fractional reserve banking is possible with bitcoin as well, fractional reserve banking is just an accounting scheme that can be done with anything.

If mt.GOX or coinbase would decide to give out loans in bitcoins, you have a defacto bitcoin fractional reserve back.

Only obstacle there is that it  is is more risky to fractional reserve bank with bitcoins because there is no lender of last resort incase all the depositors want to withdraw their bitcoins from the bitcoin bank, but before the FED existed there was no lender of last resort either in the USA and that did not stop the banks from fractional reserve banking the USD at the time.

When you put it that way I guess 'virtual' currencies have been around this whole time :P

China has not traditionally been a country that wants to keep others out.  It has traditionally been a country that wants to keep people, and more importantly their wealth, in. Only during certain periods, such as the Beijing Olympics as well as during the last few months, have they applied stricter rules for issuing visas.  I know foreigners that have been living here since the 70's without any difficulty.  If anything, I imagine China will be tightening up the borders as things could not get any more relaxed than they were just a few months ago.

USD is really backed by guns.

The most realistic viewpoint I've seen, the only reason the USD has lasted so long is because of America's firepower, people have been too scared to stand up to them so they accept the U.S Dollar or face destruction, until Bitcoin came along of course.

Well actually the US dollar used to be linked to gold that's why countries and people were willing to accept it as the world reserve currency, you used to be able to get 1 ounce for 35 dollars I think, then the US started running perpetual deficits and people started wising up to the fact there's no way the US had enough gold to pay back the debt that it owed for running the deficits and that's when Nixon delinked the dollar to gold in '71. Since then we've been inflating bubble after bubble so the USD in it's current form hasn't been around for that long

The USD has been de facto off the gold standard since 1938, ever since the gold reserve act, this is when the gold standard was suspended except for foreign exchange, when foreign central banks tried to exchange their USD for gold that is when the gold standard was officially buried by Nixon in 71, but it was already dead since 1938, because ever since 1938 no US citizen could exchange their USD for gold, only foreign central banks could in theory until they really tried to do it during the vietnam war.

There's no fractional reserve-anything in the blockchain.
Outside the blockchain, one can print as much paper as they want, so long as people accept it.

Forget about it. It just doesn't work.

 ;)

ok I tried to explain it in simple terms, guess I failed, but here is the bitcoin wiki that says :


Source : https://en.bitcoin.it/wiki/Fractional_Reserve_Banking_and_Bitcoin

again you can fractional reserve bank anything, if you do not understand this, then you do not understand fractional reserve banking, it is just an accounting scheme. It is done with fiat, it was done with gold when gold was the currency and there is no reason why it can not be done with bitcoin.

You are showing the most basic and most predictable of all human responses: denial

Yes but being linked to gold still gives the USD value, as soon as it was delinked in '71 thats when we got all that lovely inflation

You are missing a very important aspect regarding fractional banking, it requires an entity that can bailout banks and stop a run.

When we were on a gold standard banks implemented fractional banking on a much more limited scale, around 2:1, and still runs that wiped banks out were common. In today's fiat world the banks are levered over 10:1. The only way this is possible is because the FED can stop any run in its tracks by providing on demand liquidity, so runs are impossible becuase there is an entity that can bail them out.

In order to provide "on demand liquidity" the FED essentially needs the ability to expand the money supply on demand, i.e. print money.

In Bitcoin, this ability does not exist and there is no bailout entity that can provide on demand liquidity. Yes, the bankers will try to implement fractional banking on top of bitcoin, but they will be burned without a FED who can print bitcoins.

tl;dr Wall street can and will fractionalize Bitcoin, but without a printing press those attempts will fail, causing people to not trust or give their bitcoins to bankers who fractionalize, which in turn will prevent bitcoin from being fractionalized in the manner you describe.

NO I did not miss that point , I adressed it in my first post about this subject o

https://bitcointalk.org/index.php?topic=395222.msg4281267#msg4281267

The full faith of the US Gov simply means coercion and violence. I think Americans must quite enjoy violence, given that the United States has become the world leader in violence with second place so far behind that we cant even see them in the rearview mirror.

Violence and threat of loss of life and limb, or total loss of freedom (imprisonment) are quite powerful motivating factors. Extremely powerful.

That threat will be hard for Bitcoin to overcome. But it eventually will overcome it, because the emperor has no clothes. People can continue to avoid staring the truth in the face indefinitely, but when their wealth becomes radically devalued due to unsustainable economic policies which extend well beyond the borders of the USA, they will be "forced" to embrace alternatives via a different means - necessity of survival.

Id be very interested to hear what Chomsky has to say about Bitcoin.

Bahamas, Turks & Caicos, Bermuda, etc...


In what sick socialist world do you live in where all of those things paid for by tax dollars?

I think from that last post, its pretty clear Honeypot is just trolling for the lulz. Simply ignore him (click on it), he'll go away eventually.