Bitcoin Forum

So, there is no political will to reduce the US budget deficit and hyperinflation is a real possibility. The government and fed must have a plan for how to deal with this. What is it?

One interesting (conspiracy) theory is that of Red Money. Basically it is the idea that the government has already printed trillions in "red bank notes" that will be used to replace and debase the value of the USD at whatever ratio is deemed necessary. Anyone not wishing to deposit large amounts of green notes into the banking system would be forced to spend it all within a few months, thus "stimulating the economy." A variation on this idea is that the red ink may be time sensitive so a red bill will become worthless after a certain amount of time. This would force people to keep their money within the banking system (electronic dollars would not devalue over time except due to inflation).

http://brucekrasting.blogspot.com/2010/07/red-money-conspiracy-theory-11.html

Edit: This was supposed to be in "economics", how do I move it?

Hmmmm... so the theory is that the government will curb hyperinflation by introducing a currency which forces people to spend money even faster?

Sounds stupid enough that the government just might try it!

Well the twist is that only cash would be time-sensitive. Also it would force all foreign held cash to make its way back to the US or become worthless.

Ultimately I think this is trying to attack the problem of people thinking money is wealth. When people think money is wealth, they amass it, and more definitely has to be printed for actual "usage". Currency is only good to a country if it's being traded...it's an IOU, not a bar of gold.

This may be one of the better ideas I've heard lately.

This will also encourage people to invest their excess IOUs into potentially productive things. There is still the risk of people not understanding that they still need money generating assets to fund retirements, and that needs to be addressed also.

M1 would be time sensitive but not the money in savings accounts, etc.

other stores of value would have to be outlawed

you have been warned

Check out When Currencies Collapse (http://www.mediafire.com/?1sxssbg3x6in9b5) by the Foreign Affairs

Very interesting. They want SDR's as the new reserve but can't get people to agree on how to initially distribute a new (inflationary) currency in a fair manner.

I thought it would be cool if bitcoins expired after a few years which are then allowed to be recreated again by mining.  That would get rid of the incentive to hoard bitcoins but also still keep an incentive to mine.

lol @ this socialist idea of "hoarding"...isn't that just a way to make SAVING sound bad. There is nothing wrong with SAVING.

Inflation happens when there are plenty of money but little goods/services, but now most of people do not have enough money and the goods/services can be produced in whatever scale/speed

Inflation is an increase in the money supply ie. 'it inflated'. More money chasing the same amount of goods drives up prices. So poorer people suffer the most from inflation as the prices go up but they haven't gotten the newly created money yet.

It is not same amount of goods, new goods produced more and more every day, or the quality improves continuously

And, those inflated money were typically used to finance a long term project in loans form. After that project finished, what left over is debt, if there are any inflation, it should be happened during the project (when the new money enter the market), not after project completion

So, if there are many long term project (10 year +) and loan based consumption, the inflation will have no direct relationship with money supply, thus make the money supply control more difficult

The above comment makes no sense. Can you clean up your English grammar?

"It is not same amount of goods, new goods produced more and more every day, or the quality improves continuously"  ...that doesn't make sense, dude

If you can't sense it, just ignore  8)

I don't think that makes sense. That would completely destroy any remaining confidence in the dollar.

As it is, the US has a major advantage in people's faith in the dollar. They have no reason whatsoever to gamble with that faith. They already have it great. They can transfer money from the holders of USD (China, India etc.) to themselves via QE, effectively devaluing the US Dollars sitting in the vaults in China, while reaping the benefits of the new ones they create.

This is what would occur once the confidence was already destroyed, or about to be in a day or two.

Issuing a currency that isn't trusted doesn't make sense from a global perspective. No one would use it. Domestically, people may need to use it to pay taxes, but no one else would use it unless they confide in it.

So what other plans might they have?

Good question! I honestly don't think they have any plans pertaining to this. If they knew this is the outcome they would probably try to prevent it instead of thinking they can redeem themselves by issuing a new currency - which, if you ask me, doesn't make any sense.

"Hey, we just made everyone's savings in US Dollars valueless. We're making a new currency now though, get it while it's hot!"

I don't think it will go down quietly. Hopefully we've learned something since pre-WW2 though, and the depression won't lead to fascism like it did in Germany.

This plan does not make everyones savings valueless. There is a period of time when we would use a dual currency and the red dollars would be pegged to something for a few years. Something like this was done in brazil during the 1990s:

http://en.wikipedia.org/wiki/URV