No, a friend of mine was imprisoned for 3 months for being charged with running a pyramid scheme while running a legal Forex brokerage here.

Two issues raised against Bitcoin is that it takes too long to have transaction confirmed and that it does not have the qualities of cash.

Before we had fiat paper money we had state sponsored gold backed money . Before we had state sponsored gold backed money we had private bank sponsored gold backed money and physical gold. Contrary to popular belief privately issued notes did behave themselves a step above state issued notes. The main motivation being that if you could not honor claims against your institution in gold, you simple went out of business.

So in the proud tradition of wildcat banking I propose the following solution to the cash problem and the transaction speed problems.

Private institutions can be set up to issue bitcoin based paper money. The paper is printed by the same companies that print government tender, making it prohibitively expensive to forge believable copies of these notes in the long run. Security features on the notes can include a barcode that can be scanned/entered to confirm that the note has not yet been redeemed for the underlying bitcoins at the backing institution. This is however simply for individual peace of mind. The real guarantee will be that contractors of the company will be authorized to issue and later redeem the notes and subsequently destroy them. If any note that was redeemed at a specific agent is found to still be in circulation, the company can investigate and possibly revoke the contract for redemption and issuing that the agent holds.

For jurisdictions where "cash" trading may hold legal consequences subcontractors would be free to devise a workable alternative for cash trading (IE base metal medallions)

The same institution can then also offer other issuance and redemption services similar to present day banks. IE immediately cleared electronic bitcoin transfers to any party, whether they are presently a client with that institution or not. They would clear the transaction on their system and would act as a buffer between the clients and the bitcoin confirmation times. They could also set up temporary accounts for receivers of money that can be accessed via security questions discussed between the sender and the receiver. Their incentives to maintain the integrity of the Bitcoin economy is that clients may claim payment directly to bitcoin addresses. If they can not deliver they will fall into ill repute and lose market share.

Furthermore insurance companies can be set up to guarantee redemption in bitcoin. If an ensured institution wishes to offer this as an additional comfort to clients they would need to submit to proper auditing and scrutiny of an insurer, further increasing their reliability.

Hey guys,

We're kicking off the www.BitCoin.co.za for South African BTC users.

SA has some challenges in getting BTC up and running, specifically currency controls. But we hope to raise a community that can help us overcome these challenges.

Anyone from anywhere else is welcome to drop their 2 bitcents on how BTC can begin to be used in a new region. Or just Troll, there is no activity at the moment so even trolls are welcome

Hey guys,

We're kicking off the www.BitCoin.co.za for South African BTC users.

SA has some challenges in getting BTC up and running, specifically currency controls. But we hope to raise a community that can help us overcome these challenges.

Anyone from anywhere else is welcome to drop their 2 bitcents on how BTC can begin to be used in a new region. Or just Troll, there is no activity at the moment so even trolls are welcome

Hey guys,

We're kicking off the www.BitCoin.co.za for South African BTC users.

SA has some challenges in getting BTC up and running, specifically currency controls. But we hope to raise a community that can help us overcome these challenges.

Anyone from anywhere else is welcome to drop their 2 bitcents on how BTC can begin to be used in a new region. Or just Troll, there is no activity at the moment so even trolls are welcome

I've thought about this again.

I was wrong, the price of BTC will not approach some slight margin above the generation cost. The generation cost will approach the price of BTC, generation as an entrepreneurial endeavor will only support as many participants as allow for a slight profit.

Can you imagine the price of BTC when it is actually in day to day for more people buying regular goods!?

Name me some natural, state unsupported monopolies please "no to the gold cult"

History is littered with unsuccessful attempts to corner markets without the help of government coercion. Reading up on the "Robber Barons" should clear up this matter.

Really interesting question.

Presently the link between bitcoin price and computer expenses is creating a very interesting dynamic. I recently wanted to buy a $1000 machine to do bitcoin mining with. I did the calculations at $1/btc and if all I wanted was a profit (i want the PC for personal use too) then it would not have been really worth it. That analysis actually did not even take into account that I am used to working on low power machines and that the hardware to do this actually costs a lot in power usage as well.

If I had to venture a guess bitcoin will for a long time hover just above the price of generating blocks. As more people enter the game, this will become more expensive and so will bitcoin. This will increase the incentive to generate bitcoin at a lower cost; better code, more effective hardware, maybe even purpose built hardware with low power costs.

Eventually this process will hit a ceiling. It will be too specialized a task and too expensive for most people to do it profitably. I will not be surprised if this ceiling has a connection to the cost of generating a Kilowatt-hour of electricity and the power consumption of the prevailing BTC generation method.

Adding your scenario to it and assuming sunken costs in hardware, it follows that professional bitcoin generators might pay slightly less for power than they get for bitcoins (85%-95%?)

Again, awesome question.

@Gladiator

Thanks for the thought out reply. I appreciate when people are willing to do the trouble that I am not

I still hold that he does not link his phenomena in a logical fashion. He attempts a link between wages, earnings and the banking system, but does not understand or explain the banking system. Contrary to the enlightened opinion money does not need to enter the banking system to cause further debt. M3 is a multiple of base money to be sure, but since all money is debt (including base money) all the reserve banks of the world need to do is extend credit to banks to ensure that more debt and hence more money can be created.

His reasons for an oversupply in employees are not valid.
1. Computers diversify the economy, they do not shrink it. They need higher qualified people to program and maintain them. They also increase the amount of opportunities available for a business. Cost to entry in many fields are lowered by computers (take the recent rise amateur film production) and as such creates more employers not fewer. I would in fact argue the exact opposite. Computers and the internet have offset the negative impact government interventions have had on the US economy by increasing the amount of things the economy has to offer.
2. Since Europe's economy was badly damaged, it could not produce all the goods and services it would have if undamaged. This can only have a bad effect on America, not a positive one. Imagine for a moment a 1945-1971 period in which there had been no war and the American economy recovered from the New Deal and 1920s credit bubble by being left alone by the political class. The economy would have done much better than it did if it had a productive Europe to trade goods with that it actually needed. Progress would have been faster, products would be more diverse. From a monopolistic view, being the biggest functioning economy would have helped America for a time, but we would have all been better off if Europe did not need a reset.
3 and 4. More people would cause more competition in a truly free market system. They would on the one hand be additional entrepreneurs, causing and increase in employers. On the other they would initially be less economically empowered and open new opportunities for employers to enter budget markets.

They will collapse within the next 800-1000 days.

If not the IMF will have assumed the responsibilities of the Fed and we have entered the new dark ages.

No government would.

In the case of Zimbabwe, if a private player could instate a reliable means for the non-electronic community to interact indirectly with bitcoin then bitcoin would also be set. I'm thinking in terms of the use of bitcoin to protect wealth and/or to fund larger projects. The ability to stably protect wealth and assign capital leading to benefit for those participating downstream in the economy.

Filtering through the noise in economic theory is quite a challenge.

Rules for evaluating economics:
1. If it's not factual and not systematically logical, it is nonsense.
2. If it looks logical its probably not ;-)

@creighto

I disagree, the US is teetering on governmental debt collapse. One bad auction and it's all over. Since the banks at the auctions are all Fed backed buyers there will never be a bad auction. However when any of the holders of US debt finally realize that the debt simply will never be paid back then the US government can rapidly reach a scenario where it pays more in interest than it gathers in taxes. This will again never be allowed and the outstanding debt will simply be bought by newly printed money. However outside of a decreasing money supply, you cannot loan such vast amounts to the government without quickly reaching unsustainable inflation. So the federal government can only be funded by what is contracting in the money supply without causing panic. This means you have a very shaky situation that if they pull it off leads to everyone being contracted by the government and the availability of freely (free market) produced goods falling very low and the purchasing price of a dollar along with it. I doubt they can pull it off.

This is however only one of the ways the US federal government is broke. If we add social security and or the medical programs then we definitely have the political event you spoke of.

Have you read Thomas Woods' Rollback?

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Furthermore in deflation (under our current debt based fiat system, not sound money) debt becomes impossible to service as the money supply is always less than the outstanding debt. If the population attempts to pay it off they approach a line below which all money and debt implodes extremely rapidly under the force of earlier issued debt.

This will probably also not be allowed to happen and will lead to the banking complex (central banks + banks) issuing credit simply to keep their business model alive. Not over steering on this maneuver is not something that seems humanly possible.

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The eventual outcome is the default on the debt, not just national but individual debt. Be that through defaulting and a deflationary implosion, high inflation or hyperinflation. Default can happen easily but wont be allowed to. Inflation under fiat debt based currency wont help since an overburdened populous will not borrow more, so there is either an eventual default or hyperinflation.

Hi guys,

Would like to hear your take on this article. Also how would this affect bitcoin?

http://www.businessinsider.com/mike-maloney-deflation-2011-4

WW2 was not the cause for the recovery of the US economy. You do not put all your efforts into things that go up in smoke and then economically better your standing. You build things that others need and are willing to exchange for the things they built. If those things don't match you use an intermediary liquid item (money) that allows you to trade that which you do need for what others need from you. This is the only way to progress I've heard of.

I did not watch the whole video but he does not seem to go into why wages stagnated in the 70s. While I'm not American and have not done the full analysis, I don't think it is coincidental that full blown worldwide debt based fiat currency started in 1971 and that many, many economic phenomena become apparent from 1971 onward. If I had to venture a guess however it is that the stagnation in wages and the discrepancy in profits is due to taxation provisions that unduly reward "hiding" money in business assets and punishes paying people more. Under unhindered market conditions this would not be possible.

As far as I can tell he is some sort of Neo-Marxist. Marxism is an unethical, envy based belief system with equally flawed economics to explain itself. It ought not be revisited except as a cautionary tale.

Observation; he states a lot of facts but does not connect them to one another in a reliable cause and effect way. He makes flimsy connections like saying that profits are borrowed to workers at interest. The mere fact that one knows facts does not give one insight into the underlying logic, this is something that plagues the economics community.

Same thing would happen that happened to Social Networking. One dominant leader would emerge and once dominance is established the leader would need to really mess up to lose poll position.

This is imho the biggest threat facing BitCoin, not government interference.

Silver is awesome, doubled in value in the last 15 or so months.

<quote>
Unfortunately, there are no real assets backing he currency of BitCoin (and no coercive government backing it either).  Thus ends BitCoin.
</quote>

Geez, this is some bad economics from the Mises forum of all places. I agree with you Steve, the above statement is incorrect. BitCoin is not valuable because it is backed by a real asset, it is valuable because it serves the role of money. Gold also is not valuable because it is a "real asset" it is valuable because it to serves in the role of money.

Interesting, why do you expect this?