http://www.marketwatch.com/story/big-banks-conspiracy-is-destroying-america-2013-08-07?pagenumber=1

Bottom line: Goldman Sachs has become just another second-stringer in the new global Big Banks Conspiracy as capitalism appears about to self-destruct Adam Smith’s ideal and trigger the third major market crash of the 21st century, followed by a collapse of the economy, driving America and the world deep into a new Great Depression. Be prepared.

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I found out that it is interesting that most of the old people believe more in conspiracy theory than young people

This country already exists, it is HERE

A country does not need to be physically exist, it is just a group of people with similar value/political view, and their own financial system. With the help of internet, a borderless country will provide much higher degree of flexibility

This has nothing to do with ASICs, given 3600 coins a day and more and more miners join the game (I guess more than 40000 now), each person's average coin income should be less than 0.1 bitcoin per day if all of them have access to the same technology

That's an intended design from Satoshi. Manufacturing of money should be the same as any other business, when it is too difficult to manufacture money, people should work to provide goods/services in exchange for money, thus raise the value of money, but if too many people are producing goods/services to compete for a limited supply of money, the money's value will rise, thus make manufacturing of money profitable again. In this way, people either manufacturing money or manufacturing goods/services, they always have some thing to do, thus 100% employment is reached

So, until we see the exchangeable goods/services/even fiat money for bitcoin grow by a large extent, the bitcoin's mining profitability will keep dropping due to more and more people joining the mining industry

Suppose that I bought 100 bitcoins when price was $5, when bitcoin exchange rate reached $50, I might consider sell them all to receive $5000, which is a quite good return. But if it rised to $500, then 100 coins worth $50,000, I will definitely keep part of those coins and to see if it can rise even more. The higher the price, the higher confidence people will have in bitcoin, less motivation to exchange to fiat, which is losing its value constantly

And beyond a certain acceptance level, there will be only fiat money inflow, no outflow, since bitcoin will be used to direct purchase other things when there is such a need

That's a great view, I also think those people who accept bitcoin payment for their services are the one that back the bitcoin's value

As you said, quantity will not increase following the increase in price, so the supply curve should be a vertical line, actually that line will tilt towards left since the supply of bitcoin will decrease with a higher price (people will spend less coin to purchase the same thing)

BTW, the demand curve may not be like that either, since for bitcoin the demand will rise following a price skyrocket of bitcoin, and it will fall after bitcoin price crashed

Anyway, when demand rises, the price will go up

"I'm sick of the scams and greed of asic bitcoin mining companies that are scamming customers am going to do non profit miner"

“We will bring social justice, decentralisation back to bitcoin together put bicoin back in hands of ordinary people not greedy companies”

 

This is actually a grand long term view! After ASIC miners are built in millions of network switches and routers, each device will generate only a small amount of satoshi and there will be no single entity that can generate large amount of coins, means much higher degree of  decentralization

Look at this statement: USD will have a relatively stable value in the future because it have a relatively stable value in the past and now therefore the price will be relatively stable in the future

The value of money is decided by a consensus, and when people reached a consensus, it will just hold that value even the supply and demand changes. In USD's case, that consensus is reached through people's historical experience, so even the gold that originally backed USD have been removed, its value still kept relatively stable (In theory when the gold back it was removed, it should drop to zero)

In bitcoin's case, the consensus will be that this money will always rise in value because of its limited supply and unlimited demand. People won't reach such consensus if they don't know about supply and demand theory in economics, but I suppose that more and more people will gain such basic economy knowledge over time

So, the consensus about USD's value is reached by historical experience, while the consensus about bitcoin's value is reached by economics theory, they are both psychological phenomenon but that's what essentially drives people's behavior

This situation is like what I saw in Vietnam: Some business man accept USD payment, but their actual sale in USD is very small. For them USD is a type of money only rich people have, and those rich foreigners seldom appear

Same for bitcoin, only IT and financial aliens from cyberspace have this high credit currency  

Satoshi could change the name to aliencoin to further improve this impression

I'm considering research for a quantum mining chip design in the next 5 years

http://bitcoinexaminer.org/avalon-might-be-getting-a-200-million-investment-and-20nm-technology-to-become-the-leader-of-the-mining-market/

In this branch the only important factor is speed, BFL is proved to be too slow, Orsoc is good in ASIC design but they have been late to the bitcoin game thus don't follow what is happening behind the scene

There is one thing strange, the Avalon chip is designed by gridchip and now their cooperation broke, so I suppose both NGZhang and Yifu Guo have no good idea about the full design of a working ASIC chip. Maybe that is what those 200million is used for, they will fund a professional ASIC design house to manually create a high-efficient 20nm chip

If I had that amount of fund, I will invest in a quantum chip design

I totally confused by this large exchange price difference, almost 10%

At first I thought this is a good chance to arbitrage, I buy some coin at bitstamp and sell them at mtgox instantly (bitcoin transfers are quick), and 10% profit made in one hour

But there might be some larger reason behind it: Some large clients at mtgox are in urgent need of USD, but they can not get their USD out of exchange in a timely fashion, so they buy bitcoin and transfer to bitstamp, and sell them there to withdraw USD, even take a 10% loss

So, the larger bid side and higher exchange rate at MTGOX just means that there are many more USD want to get out through bitcoin

What could be the truth

As discussed before, money's value is not directly affected by supply and demand, it is mostly a consensus established among people. Even many merchants accept bitcoin payment, its exchange value may still stay low for some time, because people don't have a constant motivation to purchase bitcoin (why exchange to another currency and pay when you can pay directly with a local currency? Lower transaction fee is not a good reason, especially the consumer seldom pay for it)

So the value of bitcoin will be lying around the mining cost, where mining is the lowest possible cost to acquire bitcoin, and miners are those who are willing to put risk capitcal into bitcoin. This is a consensus that many people would agree upon


For average person, I can think of the following main motivations to purchase bitcoin:

1. To benefit from its price appreciation

2. To transfer capital worldwide

3. To store value in it to hedge the inflation risk


No.1 is just speculation, it will not affect the long term performance of bitcoin, when the exchange price do not rise, speculators will cash out and cause the price to fall

No.2 also will not affect bitcoin value, when the transfer is done, bitcoins will be converted back to fiat at another location

No.3 could be the most fundamental support for bitcoin long term wise. People believe in supply and demand curve, especially those graduated from economy schools where marginal utility is their bible. Given such a belief, they will forecast that bitcoin's exchange value will rise constantly due to its limited supply and ever-increasing demand (there is no upper limit for how much you can save)

If more people are educated and believe in such forecast, they will buy bitcoin, their buying action will push the price higher, further strengthen their belief

There are also some other motivations like tax evasion, buying drugs, hedge the risk of money being confiscated in a bank, or preparing for a total collapse of fiat money system. These are not very popular and might not be supported by government

Demurrage and inflation have same effect: Increase the money circulation. But people are adaptive, under such a system, people will try to take loan and purchase capitals like real-estate or gold/silver as a medium of saving, the saving money were pushed to somewhere else. Comparing to holding the money at hand, it created some more circulation around those saving medium.

Again, everything is relative, as soon as the society reached a newer money circulation speed, boom and bust would still happen. The only effect is the society is accelerating faster and faster like that spanish high speed train, lost the ability to maneuver when some dangers are ahead

All those talk about increased money circulation is good for society, it is just a view from the banks, since this will increase their profit potential. If a reduced money flow is good for economy, they will never promote it. In an investment conference 2004 I met a banker who was very interested in china just because this country has very high saving ratio for average household, for him that is a gold mine

Actually the gambling enterprises are hiring lots of people now, due to that most of rich people have nothing to do but gambling, that is a very profitable business in today's system where a few people holds lots of wealth but have no good way to consume them

Following your reasoning, many more strange things will happen, each step you try to make one logic right, the more loophole will pop up, but I'm not going further down this route just debate to prove that I'm right

I have a relative, his father had a bank many years ago. I'm quite sure he can't create money by just issue some loan, actually private banking is a very risky business, require huge start capital and robust backoffice infrastructure

That article has a very good point about why the economy books are telling people all those twisted concepts about the most simple money creation, because otherwise their scheme will be brought to light and everyone will understand how federal reserve banks claim people's work through printing money (notice that the money created by FED do not corresponding to any debt, it directly becomes the belonging of FED).

Now they say that money is backed by debt and they are for the good of economy, they will welcome economy theories that proves that money is created from some complex lending operations at private banks, more the better. You know that Swedish Riksbank even created the Nobel price of economy to specially promote those theories that suit their taste

This is from the perspective of a speculator, who just want to make some quick profit in fiat money. Admittedly, speculation always affect the short term price discovery

People will gain much more confident in bitcoin if they understand why today's fiat money system is fundamentally flawed. Unfortunately they were born into this established system and they seldom question the rationality of its current design

Most of the children think the sun goes around the earth, since they feel that earth is static and sun is moving. Same, most of people think fiat money has a constant value but anything else's price is fluctuating. This misbelief has costed them a fortune, they will sooner or later realize this, it is just a matter of time

If we have an indicator of the number of miners that will be great. I suppose that if the number of miners increased by 10x, then the price should rise by 10x. This is because each miner's bitcoin payout will reduce to 1/10 but their available risk capital still remain the same. Mining technology is unrelated, they will always get the best technology available

The claims (e.g. the bitcoin balance for each client account) is accepted by bitcoin users as a substitute to bitcoin, because when any single client withdraw bitcoins to pay others, they will get bitcoins corresponding to their account balance, so they think that their bitcoins are safe in my storage service, those claims are real

But, if more than half of them (or some big clients) withdraw at the same time, that claim will show its fake nature: I don't have that amount of bitcoin to pay them all. Anyway through maintain loaned ratio, I can make sure 99.99% of time there will not be a liquidity problem, that is the nature of FRB, more like insurance, has nothing to do with money creation, I don't need to create any bitcoin to do  FRB

Seems that you still have the impression that private banks create money, but if you have read that article I mentioned before carefully, it listed many strange illogical things if that is the case:

1. They will be counterfeiting money (US constitution Article I, Section 8 prohibit any entity other than congress to create money)

2. They will create money and lend to each other to solve their own liquidity problem thus there will never be bank failure

3. Since all the digital money is convertible to paper notes, there will be huge amount of printing activities in treasury when they create new money, since part of those money will surely be converted to paper notes

4. They will fail to pass double entry book keeping

Historically under a gold standard, private commercial banks indeed create paper money based on their reserve of gold/silver, but since the establish of Federal Reserve in 1913, especially after the Monetary Control Act in 1980, all U.S. deposit institutions were brought under the Federal Reserve.

"Creation of money has ever since been by the Federal Reserve and wildcat banking—an extension of goldsmith banking, private banks creating money through loaning a multiple of their gold or silver reserves, which had not been practiced for decades—was officially relegated to history."

If you think FRB need paper money, consider such a FRB scheme on bitcoin:

I open a bitcoin storage service at my city, I lend 100 bitcoins to A in my city, and he in turn spend those coins and B in the city received those coins. Since my service is the only bitcoin storage service in the city, B will deposit his 100 coins to my storage service, and then I can keep 10 bitcoin as reserve and lend rest 90 coins to C. C will spend them and D will receive those 90 coins and deposit them to me... By doing so, I will lend the same 100 bitcoins again and again, each time keep a little bit more as reserve, thus B, D, F, H... more and more people will have bitcoin deposit at my place

Then if I add all those people's deposit numbers together, I will get a much larger number than 100 bitcoins, possibly 500 bitcoins, that will be the M1 in my city's bitcoin money supply(based on M1 definition). Notice that I never hand out "claims for bitcoin", I send real bitcoin to my clients wallet and record their debt seperately in my own checkbook, every transaction will be recorded in blockchain

This scheme will not work if B, D, F, H have their own bitcoin adress at my storage service, because they will through blockchain discover that their money being lended out by me. Therefore I will provide a single adress for all of them to deposit, so that all their bitcoin deposits are mixed together. By this way they can only see that single adress having lots of deposit and payout activities, but they won't be able to tell what's really happened with their bitcoins. As long as they don't come to me at the same time demand bitcoin withdraw, I won't have any problem

If you look at how localbitcoins.com or bitcoin exchanges operate, it is a similar fashion. Although you have one personal bitcoin adress for you to deposit at localbitcoins.com, as soon as you send coins to that adress, it will be immediately moved to their adress, while at the same time you get a number to show your balance