Citibank economist wants to ban cash, for the express purpose of enabling rates to go below zero and to tax cash balances. (In order to save his employer and his paycheck).

http://www.bloomberg.com/news/articles/2015-04-10/citi-economist-says-it-might-be-time-to-abolish-cash

As horrible as this is, I wonder what the effect would be on people's perception of bitcoin? If they did this, then it would be plainly obvious to your average person that dollars are nothing more than an electronic ledger. Today a lot of people I know seem to be under the impression that cash is money and banks hold onto cash for you when you deposit money. Banning cash would break this thinking, it would be clear how money is all an accounting system only.

If they did this, and they taxed dollar holdings with a negative rate, I think more and more people would seek mechanisms to put money back into their control. Gold is one place, bitcoin wallets are another, land/stocks/etc are not since they are taxable as well.

If you liquidated your position in Bitcoin, you might as well liquidate your presence on this forum and move on with your life.

Step 1) Get https://github.com/trezor/python-trezor installed
Step 2) Change homescreen using proper commands

That was the symptom, but not the cause.

The cause was following the LTCM blow-up, the FED made it clear to creditors that they would always be bailed out and there was no risk to lending money. LTCM was levered 50 to 1, this means that for every dollar invested they borrowed 50 dollars from creditors. When LTCM went down creditors lost billions. However the FED engineered a group bailout by the banks where equity holders lost big, but more importantly credit holders recovered 100% of their principle. This was historic and it was a first.

This action created the moral hazard where it was now known the FED would restore creditors from their bad decisions and protect them from any and ALL loses. After LTCM the credit market went wild. Credit standards crashed and no one was worried because the assumption was the FED would keep them whole.

One symptom of this was the low standard mortgage debt issued (that you mention), in 2006 no one thought they could lose money because the FED would backstop fannie mae. Another symptom was every bank was able to leverage anything (no matter how junky) and IBs went to record amounts of leverage themselves.

After Bear went down, the FED again saved creditors. But this time it telegraphed that it was worried about the current state of the credit market (which it created) and may not do this again. Smart investors understood this and started to remove their exposure to credit instruments. This in turn put pressure on the credit system.

Then when Lehman went under stress the FED finally said no more, closed their liquidity window with them, and stated creditors were on their own. The run was immediate and Lehman was bankrupt in less than an hour.

This demonstrated 1 thing:
- The entire credit market existed and depended upon an implicit understanding that the FED would bail creditors out. With this understanding default risk is removed and high leverage is possible. Without this understanding risk returns and existing leverage must unwind.

Today we see the same thing with sovereign debt. No one believes any real government will default, and that the IMF or someone will always come in and bail them out. When Greece exits the euro and defaults, creditors will see that there are risks and start to price that back in. If suddenly you become worried that default risk is real, why the hell would you lend money to Spain or Japan at < 1% rates? No upside but you risk the principle. Sovereign debt valuations are based only on the (false) belief that established governments will never default.

So it comes back to my original point. Everything is enabled, supported and depends on the central banks. They enable credit bubbles in the first place. Once they are either unwilling or unable to continue artificial support, credit will deleverage which will cause the market will go down. Their only alternative is to hit Cntl+P hard.

We should do the opposite and add more privacy features to clients.

Adding finishing touches to an improved stealth address proposal that includes useful features like being usable on mobile wallets without requiring the help of a trusted third party server to identify your incoming payments.