Bitcoin Forum

Hi,

I've been asking for opinions about a proposal that's come up here in Scotland.  We're going to the polls in the next month to decide whether we want to split from England and become an independent country - basically the end of the United Kingdom that's lasted 400 years.

There's been plenty of discussion not only on whether we should, but whether we could (practically.)  One of the major stumbling blocks is the use of GBP - the Bank of England has said a post-independent Scotland can't use it.  Bit mean, but there you are.

So the question came up - If Scotland needs a new currency, why not set up a State-Run Cryptocurrency?

Here's my thoughts on the issue. 

http://cryptocurrencymadesimple.com/should-scotland-set-up-a-state-run-cryptocurrency/ (http://cryptocurrencymadesimple.com/should-scotland-set-up-a-state-run-cryptocurrency/)

Also, it appears that Ecuador got there first:

http://cryptocurrencymadesimple.com/ecuador-nationalise-cryptocurrency/ (http://cryptocurrencymadesimple.com/ecuador-nationalise-cryptocurrency/)

Would love to here what you guys think.

State-run cryptocurrency would just be another form of fiat. Decentralization is what differentiates, say, bitcoin from dollar and other state-controlled currencies, that is absence of the governing body (central bank) which is given the privilege of emitting currency monopolistically.

The problem with centralized currencies (digital or not: fiat currently is mostly digital, just a series of numbers on a database of the central bank, in favor of some commercial bank) is that they can be created out of thin air in unlimited numbers. Therefore, they are inflationary and can create some suspitions.

If it's created with a limited supply and no more can be added to that supply (a PoS coin most likely, because PoW is too costly and others would be mining if it was PoW) and then distributed among the population, I don't see why it wouldn't work, except it'd be utopia and the government would have to considerably shrink in size because they can't issue more of it, that's why they wouldn't do it in the first place, because they like to issue more currency when they run out of money :)

Why not just adopt Bitcoin itself as a main currency? You could even set up a fractional banking system based on top Bitcoin. The first government to do this is going to have a huge economic advantage for the rest of this century.

But ism't the point of cryptocurrency that there's no central authority? All the freedome it can offer stems from that.

There are still way to many liabilities for a government to implement bitcoin as a main currency
There are no cards and if there were you still can't trace payments in anyway like you can with a normal card unless bankers have accounts with their info on it which completely defeats the purpose of a decentralised currency.
If a government adopted Bitcoin, would you still call it decentralised? I don't think so

I would say it would be a bit unusual the mintchip is a project in Canada that was abandoned that had a similar aim
The Ecuador one will be interesting since it would process and secure transactions but if they are the main developers the supply of coins could be forked at any time so its hard to say what its standby value would be.

Here's the perfect example;

Paypal, from the American government.

Modern banking, just run by a system of banks, regulated by the government.

Do we need cryptos that are state-run?

That takes away from the decentralization aspect.

No the point is no Central Bank. 

The problem is they can't control the money supply.   In crisis,  things like Greece would happen

You know, it's REALLY difficult to do FRB with Bitcoin, since you are REALLY relying on having more people funneling in Bitcoins. And guess what happens when some-one wants to withdraw? Either you start funneling Bitcoins out of other's accounts, and they're left with the IOUs. And what happens when they want to withdraw, etc. It's possible, but difficult.

That's why wallets were made, so people can be their own bank. And not have to go through the bureaucracy that comes with banks. And they can't be left with IOUs, ever. Either a Bitcoin is there or it's not.

If you can do FRB w gold you can do it w bitcoins.  The difference is if people have wallets then they dont need to keep their deposits in a bank.

But loans would still exist and credit money would still exist.   Banks dont really need deposit accounts these days to create loans.

For example if you lease a car,  the leasing bank creates credit without any deposit accounts

The Ecuador cryptocurrency will exist in parallel to the existing currency.
It would be interesting to see if any country will ever get to having only a cryptocurrency.

Its interesting that USD has been legal tender in Eucador since 2000.  They dollarized their economy because inflation was 96.1% in 2000!  Dropped to 22.4% in 2001.  That is unbelievable

This move is because they are straitjacketed by the USD.   I hope it works out for them

If it were state run, it would be centralized, therefore it would be fiat, therefore it would be no different than cash. We could have per country cryptos that are decentralized, and bitcoin could be the international, but that wouldn't work for many reasons.

Thats correct.   The big difference is they might reduce manufacturing costs of minting/ printing.   And the clearing might be cheaper.

If we are talking about Eucador then they would want to have monetary controls on their currency to control inflation/ recession.   Using BTC for them is like using USD,  except its unstable and they can't import w it.   

The only problem with this, is that only people with technology could use the currency, unless there were bills with private keys on them, which would be annoying to import and you could just take the money off the bill before giving it to the store.

Govt-issued cryptocurrency is just another form of fiat money!

Id imagine Ecuador is similar to most 3rd world countries in that there is more mobiles penetration than landlines.   They'll probably implement something like M Pesa

Also I dont they will phase out physical currency completely.   What they're trying to do is wean off the USD as legal tender

Canada was setting up a state run crypto currency called MintChip - I think it went on hold due to pressure from the US Govt.

http://en.wikipedia.org/wiki/MintChip (http://en.wikipedia.org/wiki/MintChip)

To do this (that is create credit without a deposit), banks need a governing body called a central bank which works behind them actually creating new money on behalf of a lending bank. Without a CB, banks could only issue their own "private" money. Now guess what happens if this money is Bitcoin (that is there is no central bank). ;)

IMO cash is still safer than Bitcoin, cash cannot be traced by any means, Bitcoin could be traced with the correct knowledge. Probably a coin like Monero over i2p or so will be used as the next digital cash by the bad boys. Is this good or bad? I don't fucking know? as im a good guy.

I just showed example where credit is created w out Central Bank.  Most if not all car companies has financial services.   If they didn't youd have to go to commercial bank which then is connected to the Central Bank.  But surely BMWFS dont have deposit accounts.

You can't create credit in national currency (emitted by a central bank under whatever name) without the central bank. I don't understand how car companies are related to all of this.

Because 50% of money exist as credit in shadow banking.  Too lazy to post a chart.   But its on the Fed Reserve website.   Someone said its difficult to do FRB w bitcoin bc reserves.   I said it isn't.  The point about car companies is to illustrate a bank that creates credit w/o deposit accounts or reserves.  They create credit using assets (cars)

My view of money comes from Modern Monetary Theory so if a little hard to understand if you don't know the theory.  You are correct that base money comes from Central Bank.  BTW,  I think Central Banks are necessary but also their policies are ineffective  in crisis

My point is that bitcoiners mistake bitcoin as a solution when its not.   Bitcoin is based on a 20th century understanding of banking not modern banking

And so my question came up- ok, but what for? No, seriously, why? You want to save up on paper and ink or what?

Compare old fashioned paper-newspaper and issue sent to you to read on tablet. You get it?

You can lose cash by simply dropping it, but yes I agree with you in the sense that once you receive the cash, you don't know where it came from, as nothing is left on the bill to prove that. With bitcoin, you can trace the money all the way back to the block that it was created in. The problem with this is that you can see the balance of anyone, which I think is why people will hide their balances from their friends for privacy.

There is no such economic theory as "Modern Monetary Theory". What goes under this name, are just a few assertions, one of them being that the banks can create credit without having deposits prior to. But this has long been known before and refers primarily to accounting rules in banks. To make things simple, just think that the deposits are already there in the Central Bank (since it can emit any required amount of money). And don't point to Federal Reserve, if you talk about creating money without a central bank, since Fed IS a central bank.

And I still don't understand your analogy with cars. Care to expand more on this more?

No. Just... no.

No what im trying to get you to do is expand what you think is money.   To understand the financialized economy you have to grasp credit money and shadow banking

Read this about shadow banks:

http://www.stlouisfed.org/publications/re/articles/?id=2165
http://www.newyorkfed.org/research/staff_reports/sr458.html

Car finance is just an example of where a bank can create credit w/o deposits.   I just picked that because people are familiar with it.   You go to BMW to lease a car.   BMWFS creates a loan to itself out of thin air.   BMW buys the car then rents the car to you.   Then They pack these leases together as an asset backed security and these papers are used as money.   No deposits required

Any securitized instrument can also be used as money.   Residential Mortgage Backed Securities are an example.   Theres other things like repos,  money market mutual funds,  asset backed commercial paper,  etc..

The blockchain is expensive.  It is expensive to store, expensive to process, and expensive to secure.   That cost is the cost of decentralization.   It is the cost of a payment system with no trusted authority.  The 100x the annual bitcoin transaction volume could be processed by a single server with central authority.  There is absolutely no point to a centralized, decentralized currency.   You take all of the cost of decentralization and pile it on top of all the problems of a centralized currency. 

If you can't explain a theory with your own words, it shows with certainty that you don't understand it yourself (no offense intended).

Why should BMW buy you a car if they can produce it for you? In this example BMW serves as a central bank. I still don't understand the essence of your example.

They produce the cars but they are using it as asset to create credit.   Dont ask me why they do.   Its what they do.   They do this because not many people have 60K cash to buy their cars

The credit is the money.   In modern economies half the money is credit.  Why is this so hard to understand?  Not just cars but all over the finance sector

I don't in the least deny this. But you seem to be missing my point. There are only two ways a bank can create money out of the thin air. In the first case if it works as a central bank proxy (as it happens when people say that banks create money out of nothing), or it is a central bank itself. It becomes pretty evident if you take an example with no central bank. Could banks create bitcoins out of thin air? No, they could only issue "paper" bitcoins.

Also, there is nothing modern or new in this "Modern Monetary Theory".

Who said anything about new?  I said my view of money comes from MMT.  As opposed to neoclassical, Austrian, or other.

I'm not missing your point.  You just have a neoclassical view of money and you are glossing over the shadow bank industry.  You are arguing the view of neoclassicism and I'm arguing the view of MMT

Ok imagine if we revert back to a gold standard system.  Banks could still make loans using FRB but they are required to have some reserves as deposits due to regulations.  But instead of going back in time let's say we just replace the modern system w gold standard.  BMWFS can still keep financing loans using their cars as assets.  When you finance a car from BMW they create a loan.  When that car is paid off the loan is taken off their balance sheet the interest payments remain in the supply as an monetary expansion.  They can also create asset backed securities on these and use these as liquid money.  You see how this has nothing to do w Central Banks or commercial / deposit banks?

If you look at the events leading up to 2008 GFC.  This was what was happening.   People like Yellen is aware of this.  The issue is how to regulate this shadow bank money.  Nobody knows how to deal with it

Well it seems many people are against the idea.  I think it would be good in some ways because there would be the benefit of transparency in some ways.  I'd say if something like this was to happen the system would have to be more transparent then even Bitcoin for it to work.  Being able to follow funds would cut down on corruption I'd like to believe.  I'm sure in some ways it is just wishful thinking on my part but at the same time I firmly believe it is many times better then the system we have now.

I'm sure there would be new problems that haven't been thought of yet but lack of transparency with the current model outways the negatives of a cryptographic system IMO.

As I said before, I don't understand your example of BMW lending cars, so let's keep it simple and proceed now from bitcoins (apart from gold). FRB is irrelevant here, and to make things even simpler, let's assume there are no reserve requirements at all (a good assumption since there is no Central Bank to begin with). Could the banks then create bitcoins out of the thin air just like they are said to do with fiat?

No they can't create bit coins.  But they can still create credit money

But the credit money created by today's banks is the same fiat that is emitted by the Central Bank. And do you know why? ;)

I doubt that.  Not that someone won't try FRB with Bitcoin that is almost an inevitability; bankers are going to banker.  Central banks would not have much interest in a system where they can't "magic up" more money in the monetary base.  Also without the unlimited printing of central banks we would have seen the complete collapse of the banking system worldwide and probably the end of one or more modern currencies.   You can't do that with Bitcoin.   It is more like FRB using gold deposits.  Central banks are a lot less important in a system where they can't pretend that they can shape and control the economy.

Why would you want to deposit your bitcoins into a bank? Bitcoin value can grow by itself even with no help from the bank with its interest paid on deposits.

Haha we're back to this again?  Thought experiment:   if Central Bank suddenly stopped printing money,  would the money supply still increase? Or would it remained capped?

Thats basically the argument we're having

Wrong...
Decentralisation is bitcoins specialty not crypto in general.
A state run crypto would not count under what bitcoin is designed for but rather what they make of it

If anything, this state run and backed crypto would probably look something like the Anthem Vault gold backed coin

Risk-free interest? In a bank? Are you kidding?

Back to what? Now you seem to be trying to avoid cornering at all means. Banks that create money through credit are a Central Bank's proxies. And if the Central Bank would somehow want to stop for some fancy reason its currency from circulation, no bank would be able to create money in the form of this currency "out of the thin air". I think I made it pretty evident. Central Bank money printing is a metaphor, credit money is just another way of emitting money into circulation by a Central Bank through its proxies (though there are other ways as well).

Your question is sort of backwards. I think you meant to ask, "is there room for a cryptocurrency-run state?" I think that's very easy to answer if you just imagine a government and replace "constitution" with "protocol" in your head.

I've been looking at Cloakcoin's papers recently, and they have some very interesting theories and experiments in the line-up. For instance, if you merge parts of OneJury and OneMarket together, you have the basic assembly of a self-sustaining, democratic government where you could, for instance, require elected officials to put up collateral when they make oaths to uphold laws. Should they violate this oath, citizens could then, together, judge whether or not the official violated his oath by posting a "listing" (which would be an accusation of the offense). With the reward-punishment-reward scheme (or whatever they call it -- I already forget a bit), then, even this decision could be made "economically moral," where a fair ruling, ideally, is rewarded with money, while a false ruling - again, ideally - is punished by taking funds away from those who voted "incorrectly." Voters will want to be very careful to read the accusation and details surrounding it to ensure they make an informed decision, and it will certainly encourage widespread debate, maybe more logic-driven. If voters deem the accusation is correct and the official violated his oath, the collateral (and this is near-limitless when thinking about smart property) could be confiscated, with all assets (possibly including such things as a house or car deed/title) given out as mining rewards automatically.

OTOH, it may also encourage extreme poll bias unlike anything we've seen, where if a candidate or issue has a .7% lead in a poll, people may vote against their beliefs just for the money. It's for the same reason I'm skeptical of their implementation in decentralized listing moderation, but maybe it will be effective... Idunno - we'll see. Maybe it only works when voters are relatively uninterested/detached. It could also pressure people into not voting, since they could literally lose money for it. -But it could lead to a very logic-based, corruption-free society which operates on hard rules rather than whims and back-room deals. -And you can take these ideas to all sorts of other places with little imagination....

You are only talking about commercial banking.  Man why don't you read what I posted about shadow banking and see if you still come to the same conclusion.  Otherwise just agree to disagree.  Stick w your neoclassical view

There is a lot in the constitution that is open to interpretation. This is especially true and society and technology evolves in ways that the constitutional writers could not have imagined.

Bitcoin protocol on the other hand is very black and white. It is very clear if a TX or an output is valid or not.

Why do you send me somewhere to read something? Couldn't you explain your point yourself without outside references? Did I ever ask you in my posts to go read anything besides just my posts? I can explain in layman terms everything that I talk about since I understand what I write. Can you say the same about yourself? ;)

State run cryptocurrency will solve all the counterfeit problems.

And it makes the currency easier to spend and use. And easier to measure all the economic statistic.

It would regulated and end up like regular fiat.

State Run Cryptocurrency would be digital fiat. So, yeah, you can make it, but it would be same as any other fiat in the world. I wouldn't put it in same basket as todays crypto's so i'd say, no there is no room for one, but yes, it can be done and it would work just as any other except it would be centralized and issuer could pump as much as he needs into the system.

Hmmn, I tried to explain it in layman's terms but you kept saying you don't get it.  I thought something common like car finance you would understand but apparently not.  There are non-commercial banks where credit money is being created.  In fact before the 2008 GFC more money was from this shadow bank sector than commercial bank sector.  Like other neoclassicals, you are missing half the picture.  That's why their models don't work

This is true, and why a change to the constitution would require a real "amendment" (fork). A special "coin" could exist specifically for voting on whether or not the majority approves of a fork, though Proof-of-Whatever providers and users of the actual national coin client could override the decision simply by running the modified solution (or sticking with the old), I suppose, though you could also force auto-updating, turning it from opt-in to opt-out (and there are certainly other ways for a government to force users to use only one version).

Theoretically, too - keep in mind law enforcement could be handled by drones controlled by the protocol with rules "voted on" by people.

This could make revolution fascinating, where it could be a bloodless 100% money/R&D/PR/manufacturing-based war to fork the coin, or a grassroots effort to change the national coin used, which can also result in a total "reset" of the economy for better or worse. Of course, that kind of revolution isn't necessarily bloodless, though a vote to go to war against against rebels would probably require a fork itself to change the rules combat drones operate on, should it be handled by the coin's network, which I can't imagine why isn't possible (combat drones would operate on the instructions pushed in the most recently received block with, say, 50 confirmations).

-Not to say it's a superior solution, but I'll be surprised and disappointed if a country somewhere doesn't implement a similar experimental system before I die. Err - well, I guess I won't be; I'll be dead.

On "government's" side, since this can eliminate the need for dedicated statesmen and even bureaucrats to some degree (replaced largely by developers), this could result in a total intrusion of privacy, but violated by robots with no humans watching (unless a judge requires it), which may be considered acceptable. Assuming tech continues to decrease in cost, it could result in all sorts of absurd situations. For instance, say distilling alcohol in your country is illegal but not considered "actionable against the person" (rather, drones aren't going to ensure you get to a court at gunpoint or issue a fine) -- maybe instead, when the ever-seeing drone network determines you've violated the anti-distilling law, they simply turn your burners/heaters off, or if they're unable to interface with the device, issue a command to your energy provider to cut power if the law isn't complied with, and they could perhaps go from there if the person is still non-compliant (fly the pots away, hover around the offender and issue warnings, etc. There're all sorts of errors which'd be made, so humans would definitely still need to be involved, but the absurd science fiction will basically write itself, maybe with a program called "Bots" ("Cops") which has live feeds of crimes in progress. That could be a punishment... threaten to stream the crime, which could also make up plenty of pornographic content to stream and fund the government... maybe in a theocracy, they'll outlaw sodomy (another "not actionable against the person" crime) but permit streaming of sodomy within and outside the country to subscribers. With eyes everywhere, you could probably fill every porn niche, and the false positives should be equally fascinating. :D I'm getting off-topic from the thread-jacking, though -- just one of many examples on "creative funding" for our drone overlords....

Getting back off-topic - assuming AI is capable of following basic real-world "procedural generation," it should be possible for the constitution to define variables with ranges on how the AI government is to act and react with regards to both net revenue and culture. Assuming self-replication is feasible, it can build up, maintain, upgrade, and scrap itself and its units as stated. I suppose it could also be future-proofed, changing some laws real-time based on what it perceives. For instance, maybe a populist government would want certain "non-person-actionable" crimes decriminalized if it logs some percentage of the population committing the crimes. -So say marijuana begins outlawed with a flag where the software requires data be logged and analyzed on the crime, and if, say 15% of currently-living citizens have attempted or successfully committed this crime, the AI itself could repeal that law simply by monitoring cultural shifts.

I suppose it'd be stupid not to utilize widespread drone use's ability to maintain an internet with mesh networking (another revenue source!) - so if a law like this were changed, an update and alert (similar to Bitcoin's emergency alert system, I suppose) could be pushed to users in real-time with the changelog notifying everyone that the law was repealed virtually as soon as it happens, and this could happen without a fork. ... I've forgotten what I was rambling about now, though.

If you pick a large bank, your deposit is within the limit for federal insurance, I guess you could say it is risk-free.  :)

Who insures the insurer?

The FDIC is a joke, they have about 50 B USD, probably in the form of bank deposits. Anyway, they can be locked for months before the resources are released, and probably longer as the state have to intervene, which is not explicitly guaranteed, but you can probably count on it.

For the system as a whole, the question is are the states are solvent.

So you are now just saying that I'm not capable of understanding you explanations. Okay then. But you only answered one half of my question, that is that bitcoins cannot be created by banks, but you failed to address the issue how they can create state-controlled fiat. I think you wouldn't deny that the credit money allegedly created by banks out of thin air is the same money that is issued by the state?

The insurer has the ability to print money as needed and if needed, so this question makes no sense in respect to him. In short, bank debts will be socialized. But I was actually asking about risk-free interest paid on bitcoin deposits, if there would be such. So no FDIC and no printing press at Fed that would help a failed bank's depositor out.

The insurer is the FDIC and the FDIC is backed by the US government who can essentially print near unlimited amounts of money without causing massive inflation. The FDIC also can raise premiums that they charge banks for insuring the deposits.

So, if the FDIC runs out of money (because of multiple bank-runs), the U.S. government will print as much money as necessary to cover the FDIC deficit, thus making the taxpayers pay all the debts.

How do you figure taxpayers pay?  

The FDIC should prevent bank-runs. The reason the FDIC would run out of money would be because insurance premiums would not cover losses.

A bitcoin bank run would be instantaneous.  :D

How dare you ask me questions now having not answered my own? ;)

But never mind, I know that you can't answer anything coherent, so it doesn't matter. Regarding the taxpayers money, it is called socialization of debts, when ordinary people ("taxpayers") would indirectly pay for the bank debts by lowering their standard of living through inflation since the government would print money to cover the debts  (this is called seigniorage, i.e. "a right of the lord (seigneur) to mint money" from French).

What does this have w FDIC running out of money?   FDIC has $500B line of credit @ Treasury. 

Are you talking about QE "printing money"?   Please show inflation if thats what you claim.   

No, that was not my claim, you just see what your eyes want to see. I was not talking about QE "printing money". There is no inflation out of this, since the QE money doesn't leak into circulation. I was talking about how debts are socialized and the burden of them is passed on to the taxpayer in general (by means of inflation).

Is this your original claim?  that if FDIC needs money.  Fed prints money.   Inflation follows.   Taxpayers "pay the debt" of the FDIC via "debt socialization"

The inflation rate has been very low for the entire time that QE has been implemented. This is true throughout the world as many central banks have pumped tens of trillions of dollars into the banking system and the economy.

You might have noticed (well, you actually didn't) that I was talking about how socialization of debts works, and I specifically mentioned "in general". Regarding the FDIC, I don't know how much money they might potentially need, but if you insist, the answer is affirmative. In the worst case scenario, the sequence you described would necessarily lead to inflation (since the money "lost in debt" didn't disappear but just changed hands).

When everyone is using cryptocurrencies, there will be no need for governments.

Money is just a means to exchange things and not much beyond that. But you still can't buy power with money, for example (what governments are created for, i.e. to exert power upon people).

Crypto-anarchy, or crypto-libertarian. Best way to describe said scenario.

It would definitely be interesting to see what happens if this would occur, as I doubt governments would just step down and let the masses govern themselves...

It's hard to predict what it would look like or how many lifetimes it will take.

Royal Bank of Scotland and others, gonna be interesting if you scots break away, then wales will want to i bet.

crypto, well it might work but scotland and england will be messed up a lot by the break up.

In the event that the FDIC fund is insufficient,  the FDIC has credit at the Treasury.   The Fed isn't even in the picture.  Theres no protocol so an act of Congress is probably required to do what you are suggesting

Even if the Fed lends them money,  then the borrower (FDIC)  pays back the loan not taxpayers.   

Please prove the concept of "socialized debt" w real world evidence

Do you know what the word "indirectly" means, which I used in respect to ordinary people paying for the bank debts? What regards the real world evidence of debt socialization, Google is your friend (https://www.google.ru/search?client=opera&q=debt+socialization&sourceid=opera&ie=utf-8&oe=utf-8&channel=suggest&gfe_rd=cr&ei=LDXfU-i5Gcfk-gaGjYHoDg&gws_rd=ssl) (I hope you understand that you are presently not in the position of asking me to prove you anything).

I think it is a good idea and could work it the developers are trustworthy and competent.  There would need to be real discussion in depth of the plans and benefits to sell the idea.   If your going to go this route you need real planing and infrastructure already in place because this isn't going to be an experimental currency.

I've been thinking about this lately a lot: How could a state be run with Bitcoin when it's soooo volatile? isn't a solid stability in price a necessity for a currency be realiable? what is the purchasing power of 1BTC without the references on FIAT?

LOL.   You made the claim so you prove it.  Prove that taxpayers pay for bank debts.

I guess you don't know anything about accounting.   

You can't even get the concept right.   Its "privatized profits,  and socialized losses". 

When speculative demand ends and as adoptions increases, BTC is expected to become less volatile.

If a state uses a crypto it won't be bitcoin.   Bitcoin is volatile because its speculative. 

The Fed operates a big clearing system.   If anything they'll use blockchain technology to run this clearing system.   USD is legal tender and that wouldn't change.   What changes is that users have option to hold the crypto USD in their own wallets and transfer it digitally without 3rd party

Did you forget about your own claims dude? I was not talking about privatizing profits, which you obviously failed to see, but was talking about just one particular example of socializing losses, i.e. socializing bank debts. Nevertheless, I'm pleased that you finally looked at what Google says about this notion.

Your claim was that if FDIC fund was insufficient the Fed would print money to lend them.  This is already not true.  Credit comes from the Treasury who can not expand money supply

Even IF this was true, then its the FED that holds the debt not the public.  

IF the FDIC is borrowing from the public then the public is holding debt making it an asset for the public (not a liability).  

Debts & losses  are not same things.  Loss refers to income.  Debt refers to asset / liability.  You can't use these terms interchangeably unless you don't understand accounting

Please, if you have a point then explain yourself instead of giving straw men  

State would not be happy to see your OP, since that is very negative for the state.

Haven't I already explained it that the Fed would print money for the FDIC after Congress would pass a corresponding act in case there is a need for such a legislation? Where did you get that the FDIC would be borrowing from the public? Please show me that part. Debts incur losses (if not paid indeed), they are just the two sides of the same coin. And if loss refers to income (according to your words), what the heck you began talking about losses when we were talking about debts?

Theres no protocol for FDIC getting money from the Fed.  FDIC would get money from Treasury.  I said this like 3 times already.  You are explaining something you made up and does not reflect any factual evidence.  Just doesn't work how you imagine.  Accept it or go on being ignorant

If FDIC borrows the money the debt isn't "socialized" because its the FDIC that holds the debt.  You are claiming that FDIC borrows money and taxpayers has to repay the debt.  WRONG.  FDIC repays the debt.  Theres no way for them to pass it off to taxpayers.  They can pass it on to banks by raising premiums then banks can pass onto bank customers by raising fees. 

If you explained how I just did then you can argue the concept "privatized profits, socialized losses"  NOT "socialized debts".  You can't pass off your debts like that.  You can default or you can restructure

Debt is not losses.  Debt is an asset for lender and liability for borrower.  If you borrow $1M to buy a house you didn't lose $1M.  You have a liability.  If the house falls below your buying price then you lose money.  You can't even get simple concepts right

I'm sorry, but why would Scotland even consider using a currency under the control of a foreign government?


Adopting a national cryptocurrency would require the participation of all the citizens.
Scotland, as of 2012, has a home internet access and personal internet use rate of 67% and 71% (http://www.scotland.gov.uk/Publications/2011/12/22155754/5) respectively.
Potentially up to a third of its citizens could be excluded from the new crypto landscape. That is, for lack of a better word, tyrannical.

Further, existing banking infrastructure, private and public debts, monetary instruments, etc. would all go into major upheaval at the sudden imposition of a cryptocurrency.

Cryptocurrency must be allowed to grow organically - not imposed, IMHO.

If it comes down from it the FDIC would need to borrow money from the government via it's line of credit at the Treasury. Since the government is run "by the people and for the people" and since the public pays taxes to the government, the FDIC would essentially be borrowing from the public.

As much as I am in favor of Bitcoin I don't think it is well tested enough. I would wait 5 years or so at the least, and take everything the community learned over that time into consideration before making a national cryptocurrrency.

That may make it sound as though I have a negative view of Bitcoin, but I don't. Bitcoin is the only digital currency even remotely close to meeting my standards for a national currency. In my opinion, a centralized 100% digital currency simply isn't acceptable.

Cryptocurrencies like Bitcoin have finally begun to make digital currencies a viable option.

I agree. Bitcoin is way too new to be used universally throughout any country by any means. There is also not sufficient technology in place is the majority of countries as smart phone access does not reach all corners of any country.

Right. Even in rich countries like the US and EU not everyone has a smart phone or PC, not to mention internet. I suppose the government could distribute hardware wallets. Although chances are they'd screw that up worse than Butterfly labs. $600M for a website that doesn't even work proves their technological and fiscal incompetence.

Why do you read my posts so carelessly? In case the FDIC cannot cover the defaulted banks debts (which have become losses) by the available means (money from the Treasury), Congress would have to pass an act that would make the Fed print more money. It doesn't matter if this money is obtained by the FDIC from the Treasury or directly from the FED. You are trying to get away with petty semantics and particulars leaving out the whole point of passing debts (which are now losses) on to taxpayers indirectly. Read again, indirectly.


You again failed to notice that I said "indirectly". How many times should I repeat it once you take notice? The FDIC repays the debt with the newly printed money, but the money which made up the debts didn't disappear into nothing. Is it that hard to understand?
  

Uncollectible debts become losses and are written off as such. In effect, it means that you can't get back the money that has been loaned, but the money is still there, it just changed hands. This is just what happens when a bank defaults (read, has no more money). Gonna deny this?

So, in this case, the losses incurred from the uncollectible debts (bank defaults) will be paid by ordinary people directly. Now try to explain this to that guy who is ready to admit that I can't understand his explanations, but who still tries to make me explain to him how socializing debts (losses) works.

Dude,  can you think logically for a second and stop being argumentative ?  If you run a business and you needed an extra $1M.  You borrowed $1M from your mom.   Does it mean the debt is passed to your mom?   You think this means your mom paid the debt?

If FDIC borrows money from Treasury,  then FDIC is debtor.   Treasury/ creditor gets interest payments.

You're just reaching now.   FDIC doesn't cover defaults.   They insure deposits.   Just forget your political bias and do some research.   Sheesh

The debt is on me (bank), and if I'm not able to return the debt (deposit), it will be passed to a guarantor on the debt (FDIC). If this guarantor is a state and can't pay the debt, it can either default or print more money (Fed), thus indirectly (I hope I won't have to repeat this again) passing the debt on to the taxpayers (US citizens). I see no logic at all in what you say or ask. You could just as well bumble something incoherent with a clever face.

In this scenario you still are the debtor.  What you don't seem to grasp is that the money is loaned not given for free

There's no FED printing money either for FDIC.  That's something you made up

It is not relevant to the point discussed whether I would remain a debtor or not. What's important here is who will pay the debts and with what means. Regarding the FED not printing money directly for the FDIC, it is not relevant here either. If it ever comes to choosing between default and printing more money, the FDIC will get all the money they would need, whether through the Treasury or directly from the FED, but this wouldn't change anything. You're just trying to cling to insignificant details and obfuscate the issue (that debts will be socialized).

What do you mean its not relevant?  Thats the entire topic we are discussing.  "Default" means can't pay the loan.  Has FDIC borrowed any money?  NO.  The correct term you want is "insolvent"

I've said enough.  Its obvious you don't know about accounting.  You got everything wrong and you think you can make a blanket statement about the FED and inflation.  LOL Please continue in ignorance

Insolvency means the inability of a debtor to pay their debt. And now find the difference with your "default means can't pay the loan". And stop making value judgments, they speak more about you than me.

"Default" essentially means a debtor has not paid a debt which he or she is required to have paid.
"Insolvency" means that a debtor is unable to pay his or her debts. -->  In accounting terms it means liabilities exceed assets

If liabilities of FDIC exceed its assets then FDIC is "insolvent"  -->  This is what we are talking about.  Run on bank deposits that exceed the FDIC fund.  We are not talking about FDIC defaulting on a loan.  The correct term is "insolvent"

The issue here is you don't know what you are talking about.  Instead of researching by yourself and once and for all understand how it works you continue to argue w me.

Like I said, look it up for yourself or continue in ignorance.  I don't care either way

Why are you intentionally continuing to misinterpret my words?

As you again didn't notice, I was talking about bank defaults, and once again you ascribe to me what I didn't say. Default is the end result of insolvency, but this won't help you, since we are talking about socializing debts and not about the semantic differences between default and insolvency. Because you won't get it right at once, I repeat again, we are talking about socializing debts.

Also, since you took to nitpicking, I should point out that what you said before about default ("default means can't pay the loan") is essentially the same what you now say about insolvency ("insolvency means that a debtor is unable to pay his or her debts").

Would a state run cryptocurrency imply that it is backed by something? Also, maybe, since more people would be up for adoption and integrate it in their shops/stores if the state created it rather than an anonymous individual.

Fiat is backed by its usefulness in extinguishing tax liabilities imposed by the state, so the same utility has to be expected from a state run cryptocurrency.   

This could work out well.  At least it would have a built in community and some legitimacy (as long as it wasn't North Korea).  Not sure they would make it open source though.

The future currency will probably be replaced by crytocurrencies.

Only difference will be who is backing them, either government or free market.

I agree.   I bet on govt because legal tender laws

I would bet on one or two free market backed altcoins surviving, along with the government currencies.

Government cryptos or fiat?

I can see fiat surviving, maybe, for a while, but it's hard to see a government crypto surviving.

A govt crypto doesn't have to be decentralized like bitcoin.  It can use block chain technology to upgrade their ACH clearing system.  Fiat would still exist.  For example bit dollar is pegged to USD.  People can have wallets and its tied to their SS# or some other govt ID.  On the front end people use it like Paypal or Google Wallet.  On the back end Central Bank use block chain to track money flow. 

Could be a crypto which is backed by a fiat.
ie, the money supply would still be controlled by a central monetary authority.

It makes no sense to replace a state emitted fiat with a state emitted cryptocurrency since cryptocurrencies don't have any real advantage over digital fiat besides being decentralized (but apparently this would be impossible for a state run cryptocurrency).

Cryptocurrencies do have advantages over digital fiat - eliminating banks, huge transaction fees.....

This all is mainly a result of decentralization which I specifically pointed out in my post. Regarding huge transaction fees, I primarily use services of those banks that either don't charge transaction fees at all or charge a tiny fixed sum (around $0.3 per transaction, as an example).

But your mileage may vary indeed! ;)

Its suicidal imo, when you cant even withdraw btc easily from ATMs, but why not? argentina is already done for.

Jersey (an autonomous island of the UK and a well established “tax haven”) is seriously considering Bitcoin adoption in the nearest future. 



http://www.cryptocoinsnews.com/news/jersey-become-worlds-first-bitcoin-isle/2014/07/11

Bali could already be getting there.
Jersey will have some catching up to do.

http://www.coindesk.com/bitislands-bali-bitcoin-paradise/

Its plain and simple,Bitcoin
 can't be handled by any Central Bank.

Well, let's just hope that some internationally recognized state will finally make one day Bitcoin its legal tender in the strictest sense of the word (that is a means of payment for "all debts, public charges, taxes, and dues").

Yes, Instead of 'dollarizing' a country, let us hope they 'bitcoinize' it.  :)

If each country adopted its own coin then it would remove one of bitcoins greatest features which is that it is an indiscriminate, borderless currency.

I think it's important to distinguish between Bitcoin being used a token and a proper currency. With the former, coins would be converted to fiat at the first opportunity. Not saying that's a bad thing, but being accepted as an intermediary token is different from being accepted as a functional currency.

Bitcoin would still be the 'USD' to all the different countries' coins. :)

It's obviously far from a cryptocurrency in principle and function, but the only similarities I can foresee are the similar cryptographic technologies that Ecuador might use. I'm curious as to what they might be.

We could have me-too currencies from all the failed economies if this takes off.  ;)