Bitcoin revolutionary?

[semaforo]

One thing I find missing from this discussion so far is the effect of switching from inflationary fiat currencies to deflationary bitcoin. Much of the current system has been so slanted towards overproduction and overconsumption due to the inflationary nature of dollars, euros, etc.

An example of what I mean: I've been playing around with bitcoin based investing for a while now, and one of the interesting things I've learned is that some assets will naturally decline in price due to deflation. Think about "mining turds", which should have declining prices as mining difficulty rises. They can still be a good investment though, as long as the price plus accumulated interest (dividends) does add up to more than the initial price. [I'm not sure any of them meet that criteria, just that it is possible.]

How will deflationary currencies affect store profits? Capital accumulation? Business investments? What opportunities will arise for new businesses that can only exist/survive in a deflationary period? What will happen to businesses that exist now only because the primary currencies are inflationary? These are the things I'm thinking about. The fact is that bitcoin is here and it is going to change things. No Utopian wishing is going to change its essential nature, so best to deal with it as it is.

   Agreed... this reminds of Max Keiser's discussion on the credit apartheid. Inflation serves as a tool to concentrate debt in the hands of the wealthy. It reduces the value of everyone's wealth, but the wealthy are still able to leverage big investments based on their creditworthiness. As inflation outpaces wage growth, working people's money becomes worth less and less, as they are forced to spend their earnings on surviving rather than investing, and those who still have surplus wealth, even though it is worth less, are able to invest, which channels money from working people to those who can still afford to invest. A concrete example:

   Joe has 6000 dollars a month. He spends 5000 on house/car/food/utilities and invests 1000 in retirement fund and college fund for kids. Inflation kicks in, let's say, devaluing the money by 10% over a few years. Joe gets a raise in this time, but it's only an additional 300 dollars a month. Now his income has effectively been reduced by 330 dollars- inflation hit him with a minus 10% and the raise increased it by 5%. That means he is faced with two choices: lower standard of living or invest less. This is the choice the American middle class is facing right now.
     On the other hand, Uncle Scrooge has a net worth of $10 million, and is getting 10% interest on two million of it, having invested in a combination of mortgage banks, consumer product companies like toilet paper and potato chip manufacturers, and so on. This two million generates two hundred thousand a year which Scrooge can live on. Scrooge also has 8 million in assets in real estate. Whereas Joe's creditworthiness is dependent on his employment, Scrooge has a huge line of credit just based on his assets- when Joe loses his job, Scrooge can borrow 3 million and snap it up and ten others like it at 20% below market value, just because he has the cash and because Joe is strapped for cash. Joe continues consuming toilet paper and potato chips, but starts investing less. Scrooge flips the ten houses he bought for 10% profit when the stimulus packages kick in and the housing market increases. The loss in value due to inflation does not bother Scrooge much, because his income is already in excess of his expenses. His ability to play the market to his advantage effectively negated inflation's effect on his wealth.
      So inflation serves as a squeeze to concentrate wealth in the hands of the already wealthy. Gold could have been a deflationary bastion in the past for people, but the difficulty in dividing it and converting it for every day transactions made it impractical to your average working family. Deflationary currencies competing with national currencies just get shut down by the government.
    And there's the revolutionary- it closes one channel of accumulation by making available a store of wealth that can be used for everyday purchases, that is easily divisible and easily convertible, and not to mention it has the growth rate of a pyramid scheme without actually being a pyramid scheme- the more people get in on bitcoin and make the switch from fiat, the greater its value- it's like taking bricks from the pyramid, which is only there for the sake of the Pharaoh's vanity, and using it to build things like workshops and houses.
    I think when people realize this they have one of two reactions-
either "Wow, this is great, I want to support this!" or "The government is obviously going to shut this down, I'm going to keep at most a modest position in bitcoin and watch to see how it turns out." However, being truly global, even if the US, Europe, Australia, and Russia shut all exchanges down, we will still probably be able to buy drugs, Iranian crude, weapons, Argentinian pesos, as well as rapidly inflating dollars from Chinese entrepreneurs who've been selling American plastic crap for the last fifteen years, for bitcoin, with exchanges based in Iceland, Bolivia, Tokelau, Switzerland, Kazakhstan, and so on and so forth.
    It used to be people would store value in gold. Then in war time, governments would come and pull out everybody's gold teeth, take all their jewelry, tear apart their houses and confiscate all the gold. Try doing that with a brain wallet.

[esenminer]

I don't agree. I believe for the most part our economy is supply and demand. A 100% free market without government intervention is an ugly thing - think industrial revolution with little or no rights or powers in the hands of workers. Workers united to form unions which forced governments to intervene and create laws which limited free market action primarily through taxation / spending and economic policy.

Taxation, primarily income tax but sales and other taces are used to redistribute wealth by providing services like healthcare, education, military and sometimes by direct spending usually on infrastructure like road building, bridge building, damns...

Economic policy, what I think you're referring to is the ability of the government / federal bank to directly stimulate or slow down the economy. They do this by by loaning money, 'creating it' in a sense, to banks at their best interest rate. When they decrease the prime interest rate banks can lend at lower rates, more people will borrow and the economy will be stimulated and when they increase it the economy will tend to slow down - that's the idea at least. Creating too much money can lead to inflation and too little to deflation.  The whole point of economic policy is to smooth out the highs and lows of a free market so that we don't end up in a recession or depression. It's not perfect and usually doesn't work well (!) but this is not the fault of the policy - it's a good idea in theory but in real life attempts to affect the economy take a long time to play out so a policy decision today might start showing it's effects months and months from now. So policy makers are always in a position of trying to figure out if what they did had the intended affect and what they should do next

Why do you think this is nonsense? How do politicians fit in here? Accommodate them how?

Fiscal and monetary policies provide a temporary fix for the economy, similar to the way smoking crack provides a temporary sense of euphoria.  However, the long term effects are destructive.  Also, like crack, economic stimulus becomes addictive and it takes a bigger and bigger dose to keep getting the desired effect until eventually an overdose is experienced.  Central banks were created by politicians to finance all of their brilliant ideas.  Politicians are the central banks largest customers.  Without central banks, the politicians would have never been able to acquire the insurmountable debt that they now have.  Society doesn't need politicians to provide for our every need.  The free market can do so much more efficiently.

I don't understand the references to politicians in this context. For example in the US the politicians have no direct say over monetary policy that I discussed above. The prime interest rate is decided several times a year by the treasury (or a sub group composed of federal banks). Politicians have access to either the national budget and if required they can raise additional money buy issuing bonds and pay interest on that - is this what you are referring to? Are there any specific instances of these brilliant ideas that come to mind?

Just for completeness I pulled this information from the US budget for last year http://en.wikipedia.org/wiki/United_States_federal_budget

During FY2012, the federal government collected approximately $2.45 trillion in tax revenue, up $147 billion or 6% versus FY2011 revenues of $2.30 trillion. Primary receipt categories included individual income taxes ($1,132B or 47%), Social Security/Social Insurance taxes ($845B or 35%), and corporate taxes ($242B or 10%).[13] Other revenue types included excise, estate and gift taxes.

and

During FY 2012, the federal government spent $3.54 trillion on a budget or cash basis, down $60 billion or 1.7% vs. FY 2011 spending of $3.60 trillion. Major categories of FY 2012 spending included: Medicare & Medicaid ($802B or 23% of spending), Social Security ($768B or 22%), Defense Department ($670B or 19%), non-defense discretionary ($615B or 17%), other mandatory ($461B or 13%) and interest ($223B or 6%).

and most interestingly which is relevant to your point

The annual budget deficit is the difference between actual cash collections and budgeted spending (a partial measure of total spending) during a given fiscal year, which runs from October 1 to September 30. Since 1970, the U.S. federal government has run deficits for all but four years (1998–2001)[48] contributing to a total debt of $16.77 trillion as of March 31, 2013.[49] [50]

[shawshankinmate37927]

Fiscal and monetary policies provide a temporary fix for the economy, similar to the way smoking crack provides a temporary sense of euphoria.  However, the long term effects are destructive.  Also, like crack, economic stimulus becomes addictive and it takes a bigger and bigger dose to keep getting the desired effect until eventually an overdose is experienced.  Central banks were created by politicians to finance all of their brilliant ideas.  Politicians are the central banks largest customers.  Without central banks, the politicians would have never been able to acquire the insurmountable debt that they now have.  Society doesn't need politicians to provide for our every need.  The free market can do so much more efficiently.

I don't understand the references to politicians in this context. For example in the US the politicians have no direct say over monetary policy that I discussed above. The prime interest rate is decided several times a year by the treasury (or a sub group composed of federal banks). Politicians have access to either the national budget and if required they can raise additional money buy issuing bonds and pay interest on that - is this what you are referring to? Are there any specific instances of these brilliant ideas that come to mind?


Just for completeness I pulled this information from the US budget for last year http://en.wikipedia.org/wiki/United_States_federal_budget

During FY2012, the federal government collected approximately $2.45 trillion in tax revenue, up $147 billion or 6% versus FY2011 revenues of $2.30 trillion. Primary receipt categories included individual income taxes ($1,132B or 47%), Social Security/Social Insurance taxes ($845B or 35%), and corporate taxes ($242B or 10%).[13] Other revenue types included excise, estate and gift taxes.

and

During FY 2012, the federal government spent $3.54 trillion on a budget or cash basis, down $60 billion or 1.7% vs. FY 2011 spending of $3.60 trillion. Major categories of FY 2012 spending included: Medicare & Medicaid ($802B or 23% of spending), Social Security ($768B or 22%), Defense Department ($670B or 19%), non-defense discretionary ($615B or 17%), other mandatory ($461B or 13%) and interest ($223B or 6%).

and most interestingly which is relevant to your point

The annual budget deficit is the difference between actual cash collections and budgeted spending (a partial measure of total spending) during a given fiscal year, which runs from October 1 to September 30. Since 1970, the U.S. federal government has run deficits for all but four years (1998–2001)[48] contributing to a total debt of $16.77 trillion as of March 31, 2013.[49] [50]

Bankers and politicians have a symbiotic relationship.  The US Federal Reserve currently has over $3 trillion in US Treasury Department IOUs on it's balance sheet.  That's $3 trillion that was created and loaned to the Treasury Department for the express purpose of funding the federal government's budget.  I forget how many IOUs are in the Social Security Trust Fund, but those IOUs will also eventually be purchased by the Federal Reserve with newly created dollars and end up on their balance sheet.  The Federal Reserve exists to ensure that politicians are able to acquire the funding needed to expand the size of government more that it would otherwise be able to.  Taxes do not provide enough revenue, hence the deficits.  The Federal Reserve will keep coming up with new programs under the guise of stimulating the economy, but the true purpose of imposing an inflation tax by expanding the money supply is to fund government programs.  The bankers are all too happy to play along, because they profit immensely.

A few of the brilliant ideas of the politicians that I was referring to that immediately come to mind include wars, food stamps, and public health care.  When I say "brilliant", I'm being facetious, of course.  

[Zarathustra]

Tribalism ---> Feudalism ---> Capitalism -------->  ....BITCOINISM

Tribalism ---> Feudalism ---> Capitalism -------->  ....BITCOINISM ----------> Tribalism

[esenminer]

Fiscal and monetary policies provide a temporary fix for the economy, similar to the way smoking crack provides a temporary sense of euphoria.  However, the long term effects are destructive.  Also, like crack, economic stimulus becomes addictive and it takes a bigger and bigger dose to keep getting the desired effect until eventually an overdose is experienced.  Central banks were created by politicians to finance all of their brilliant ideas.  Politicians are the central banks largest customers.  Without central banks, the politicians would have never been able to acquire the insurmountable debt that they now have.  Society doesn't need politicians to provide for our every need.  The free market can do so much more efficiently.

I don't understand the references to politicians in this context. For example in the US the politicians have no direct say over monetary policy that I discussed above. The prime interest rate is decided several times a year by the treasury (or a sub group composed of federal banks). Politicians have access to either the national budget and if required they can raise additional money buy issuing bonds and pay interest on that - is this what you are referring to? Are there any specific instances of these brilliant ideas that come to mind?


Just for completeness I pulled this information from the US budget for last year http://en.wikipedia.org/wiki/United_States_federal_budget

During FY2012, the federal government collected approximately $2.45 trillion in tax revenue, up $147 billion or 6% versus FY2011 revenues of $2.30 trillion. Primary receipt categories included individual income taxes ($1,132B or 47%), Social Security/Social Insurance taxes ($845B or 35%), and corporate taxes ($242B or 10%).[13] Other revenue types included excise, estate and gift taxes.

and

During FY 2012, the federal government spent $3.54 trillion on a budget or cash basis, down $60 billion or 1.7% vs. FY 2011 spending of $3.60 trillion. Major categories of FY 2012 spending included: Medicare & Medicaid ($802B or 23% of spending), Social Security ($768B or 22%), Defense Department ($670B or 19%), non-defense discretionary ($615B or 17%), other mandatory ($461B or 13%) and interest ($223B or 6%).

and most interestingly which is relevant to your point

The annual budget deficit is the difference between actual cash collections and budgeted spending (a partial measure of total spending) during a given fiscal year, which runs from October 1 to September 30. Since 1970, the U.S. federal government has run deficits for all but four years (1998–2001)[48] contributing to a total debt of $16.77 trillion as of March 31, 2013.[49] [50]

Bankers and politicians have a symbiotic relationship.  The US Federal Reserve currently has over $3 trillion in US Treasury Department IOUs on it's balance sheet.  That's $3 trillion that was created and loaned to the Treasury Department for the express purpose of funding the federal government's budget.  I forget how many IOUs are in the Social Security Trust Fund, but those IOUs will also eventually be purchased by the Federal Reserve with newly created dollars and end up on their balance sheet.  The Federal Reserve exists to ensure that politicians are able to acquire the funding needed to expand the size of government more that it would otherwise be able to.  Taxes do not provide enough revenue, hence the deficits.  The Federal Reserve will keep coming up with new programs under the guise of stimulating the economy, but the true purpose of imposing an inflation tax by expanding the money supply is to fund government programs.  The bankers are all to happy to play along, because they profit immensely.

A few of the brilliant ideas of the politicians that I was referring to that immediately come to mind include wars, food stamps, and public health care.  When I say "brilliant", I'm being facetious, of course. 

I agree that wars / military spending in the US is way too high but I have no problems with healthcare or welfare - healthcare I believe is a right - if I'm paying taxes the least the government can do is make sure I can stay healthy

I see your point above about generating debt but isn't this only a temporary position? the us has had surplus in the last decade and several times before that (although overall it does tend to run a deficit). Other countries tend to run surpluses every year. What is the affect of this on the avg person?

[esenminer]

I think in terms of technology Bitcoin is revolutionary but I don't see how it could revolutionize our current economic system.

The key problem is that it does not address the distribution and accumulation of wealth. In fact the current mining system promotes this. People mine, collect coins, re-invest. Those with more coins can invest more and make more and over time the distribution of coins is unequal with a small percentage of people holding a majority of the coins.

The second problem is it's link with FIAT money which it needs for it to have any current real world use. This link makes it a commodity, like gold, and wealthier people always end up with more.

If the world were to implement a complete Bitcoin system wouldn't we just end up in the same place we are now? Minority of people holding the majority of Bitcoins? Instead of everything being done with various FIAT it would be done with Bitcoin - sure everything would be much simpler, digital, some things cheaper and less worry about inflation but for all intents and purposes the exact same underlying economic system.

An economic revolution would have to address the distribution and accumulation of wealth.

It isn't necessarily if there is an unfair distribution of wealth, but more-so WHO controls that wealth.

A. Would you rather it be controlled by congress? The Federal Reserve + international corporate banks? Wall Street? The Pentagon? IMF?

B. Or would you rather it be controlled by brilliant, innovative, scientific, and empathetic nerds who seek to improve humanity?


The choice is yours. Put your money in a mutual fund and it goes to A. Put it in bitcoin and it goes to B.

I'm not sure about this. Putting your money in a mutual fund can mean anything from investing a basket of companies in the tech sector or a basket of companies representing all companies on a stock exchange. You haven't lost control of your money, you've invested in those companies and you earn money depending on how the company (shares) performs. You can always invest in mutual funds which buy shares in companies run by those in B

[esenminer]

One thing I find missing from this discussion so far is the effect of switching from inflationary fiat currencies to deflationary bitcoin. Much of the current system has been so slanted towards overproduction and overconsumption due to the inflationary nature of dollars, euros, etc.

An example of what I mean: I've been playing around with bitcoin based investing for a while now, and one of the interesting things I've learned is that some assets will naturally decline in price due to deflation. Think about "mining turds", which should have declining prices as mining difficulty rises. They can still be a good investment though, as long as the price plus accumulated interest (dividends) does add up to more than the initial price. [I'm not sure any of them meet that criteria, just that it is possible.]

How will deflationary currencies affect store profits? Capital accumulation? Business investments? What opportunities will arise for new businesses that can only exist/survive in a deflationary period? What will happen to businesses that exist now only because the primary currencies are inflationary? These are the things I'm thinking about. The fact is that bitcoin is here and it is going to change things. No Utopian wishing is going to change its essential nature, so best to deal with it as it is.

   Agreed... this reminds of Max Keiser's discussion on the credit apartheid. Inflation serves as a tool to concentrate debt in the hands of the wealthy. It reduces the value of everyone's wealth, but the wealthy are still able to leverage big investments based on their creditworthiness. As inflation outpaces wage growth, working people's money becomes worth less and less, as they are forced to spend their earnings on surviving rather than investing, and those who still have surplus wealth, even though it is worth less, are able to invest, which channels money from working people to those who can still afford to invest. A concrete example:

   Joe has 6000 dollars a month. He spends 5000 on house/car/food/utilities and invests 1000 in retirement fund and college fund for kids. Inflation kicks in, let's say, devaluing the money by 10% over a few years. Joe gets a raise in this time, but it's only an additional 300 dollars a month. Now his income has effectively been reduced by 330 dollars- inflation hit him with a minus 10% and the raise increased it by 5%. That means he is faced with two choices: lower standard of living or invest less. This is the choice the American middle class is facing right now.
     On the other hand, Uncle Scrooge has a net worth of $10 million, and is getting 10% interest on two million of it, having invested in a combination of mortgage banks, consumer product companies like toilet paper and potato chip manufacturers, and so on. This two million generates two hundred thousand a year which Scrooge can live on. Scrooge also has 8 million in assets in real estate. Whereas Joe's creditworthiness is dependent on his employment, Scrooge has a huge line of credit just based on his assets- when Joe loses his job, Scrooge can borrow 3 million and snap it up and ten others like it at 20% below market value, just because he has the cash and because Joe is strapped for cash. Joe continues consuming toilet paper and potato chips, but starts investing less. Scrooge flips the ten houses he bought for 10% profit when the stimulus packages kick in and the housing market increases. The loss in value due to inflation does not bother Scrooge much, because his income is already in excess of his expenses. His ability to play the market to his advantage effectively negated inflation's effect on his wealth.
      So inflation serves as a squeeze to concentrate wealth in the hands of the already wealthy. Gold could have been a deflationary bastion in the past for people, but the difficulty in dividing it and converting it for every day transactions made it impractical to your average working family. Deflationary currencies competing with national currencies just get shut down by the government.
    And there's the revolutionary- it closes one channel of accumulation by making available a store of wealth that can be used for everyday purchases, that is easily divisible and easily convertible, and not to mention it has the growth rate of a pyramid scheme without actually being a pyramid scheme- the more people get in on bitcoin and make the switch from fiat, the greater its value- it's like taking bricks from the pyramid, which is only there for the sake of the Pharaoh's vanity, and using it to build things like workshops and houses.
    I think when people realize this they have one of two reactions-
either "Wow, this is great, I want to support this!" or "The government is obviously going to shut this down, I'm going to keep at most a modest position in bitcoin and watch to see how it turns out." However, being truly global, even if the US, Europe, Australia, and Russia shut all exchanges down, we will still probably be able to buy drugs, Iranian crude, weapons, Argentinian pesos, as well as rapidly inflating dollars from Chinese entrepreneurs who've been selling American plastic crap for the last fifteen years, for bitcoin, with exchanges based in Iceland, Bolivia, Tokelau, Switzerland, Kazakhstan, and so on and so forth.
    It used to be people would store value in gold. Then in war time, governments would come and pull out everybody's gold teeth, take all their jewelry, tear apart their houses and confiscate all the gold. Try doing that with a brain wallet.

And there's the revolutionary- it closes one channel of accumulation

Very nice point and to that point I want to propose something - I mentioned it earlier but I guess people ignored it

What if all channels of accumulation were closed and distribution more uniform. Assuming you could guarantee each person a single unique wallet, when applied to Bitcoin it would look something like

1. Transaction fees are higher - say 10-15% and they are distributed equally over the network - this results in a steady flow of income for all users. I spend 100 Bitcoin, 10-15 bitcoins get spread to all users.

2. Negative interest on wallet balances - for example 4-5% of your wealth is redistributed automatically every X days if you don't spend it. I have 100 Bitcoin, I lose 4-5 bitcoins if i don't spend it X days - they get spread to all users.

With the end result (maybe) being that everyone has a steady stream of income and it is difficult if not impossible to accumulate coins as the more you have the more you lose hence very little motivation to save more than you can spend. It's very naive and crude but something like this can only work with a decentralized digital currency. I'm sure there are various ill side effects but it seemed interesting to think about it.

[Etlase2]

With the end result (maybe) being that everyone has a steady stream of income and it is difficult if not impossible to accumulate coins as the more you have the more you lose hence very little motivation to save more than you can spend. It's very naive and crude but something like this can only work with a decentralized digital currency. I'm sure there are various ill side effects but it seemed interesting to think about it.

Again I'd like to direct your attention to the link in my signature. While it is not as crude and punishing as your idea here, you might like it. Most new money is distributed via a sort of transaction fee refund policy. Money production is unbound, but has lots of brakes based on tx activity, and miners creating new money creates a lot of additional free money that is distributed via that tx activity.

What I think this does is prevent the advantage you mention to the wealthy in economically poor times. When deflation exists, money will be added to the supply at the lowest levels, and I don't believe that the wealthy will be able to have such a huge advantage over the not-wealthy as you have described. I don't think we need to devolve all the way down to completely eliminating money as a store of value.

However, freicoin supports this theory, it might also interest you.

[Carlton Banks]

I agree that wars / military spending in the US is way too high but I have no problems with healthcare or welfare - healthcare I believe is a right

Good luck with that; government mandated healthcare comes from business interests too, and guess what? They prefer bigger profits to smaller ones. Hence, palliatives are what they produce. There's no profit incentive in keeping your population 100% healthy, how would the pharmaceutical companies and health insurers profit from that dynamic? The most profitable model is to try to ensure that everyone has some ailment or other, so that it can be capitalised.

[shawshankinmate37927]

I agree that wars / military spending in the US is way too high but I have no problems with healthcare or welfare - healthcare I believe is a right - if I'm paying taxes the least the government can do is make sure I can stay healthy

I see your point above about generating debt but isn't this only a temporary position? the us has had surplus in the last decade and several times before that (although overall it does tend to run a deficit). Other countries tend to run surpluses every year. What is the affect of this on the avg person?

I don't have a problem with government provided welfare and healthcare for those who want it and are willing to pay for it.  I do have a problem with forcing it on those who don't want it and forcing them to foot the bill for it or debasing the currency and saddling future generations with debt to pay for it.

No, I don't think the national budget is going to be balanced anytime soon.  Their debt will just keep getting bigger.  Even the government bureacrats are projecting deficits for years into the future.  According to the quote you provided in Post #49:

The annual budget deficit is the difference between actual cash collections and budgeted spending (a partial measure of total spending) during a given fiscal year, which runs from October 1 to September 30. Since 1970, the U.S. federal government has run deficits for all but four years (1998–2001)[48] contributing to a total debt of $16.77 trillion as of March 31, 2013.[49] [50]

The Treasury Department was able to claim a budget surplus for the four years from 1998-2001 only because they were looting the Social Security Trust Fund (SSTF) and replacing those funds with IOUs.  (See Chapter 1 of the IOUSA documentary: www.youtube.com/watch?v=lcb0hMPG5S0#t=07m52s)  Without the ability to divert SSTF money to the other programs, there would have been a surplus only for the year 2000 in that four year period.

The average person has to pay higher taxes, work more to make ends meet, and watch their dollars lose purchasing power.  If allowed to continue, eventually the dollar and the bond market collapse.

[esenminer]

With the end result (maybe) being that everyone has a steady stream of income and it is difficult if not impossible to accumulate coins as the more you have the more you lose hence very little motivation to save more than you can spend. It's very naive and crude but something like this can only work with a decentralized digital currency. I'm sure there are various ill side effects but it seemed interesting to think about it.

Again I'd like to direct your attention to the link in my signature. While it is not as crude and punishing as your idea here, you might like it. Most new money is distributed via a sort of transaction fee refund policy. Money production is unbound, but has lots of brakes based on tx activity, and miners creating new money creates a lot of additional free money that is distributed via that tx activity.

What I think this does is prevent the advantage you mention to the wealthy in economically poor times. When deflation exists, money will be added to the supply at the lowest levels, and I don't believe that the wealthy will be able to have such a huge advantage over the not-wealthy as you have described. I don't think we need to devolve all the way down to completely eliminating money as a store of value.

However, freicoin supports this theory, it might also interest you.

Hi sorry I must have missed your earlier reference - I will defn check it out, thanks.

[bitcoinbear]

I think in terms of technology Bitcoin is revolutionary but I don't see how it could revolutionize our current economic system.

The key problem is that it does not address the distribution and accumulation of wealth. In fact the current mining system promotes this. People mine, collect coins, re-invest. Those with more coins can invest more and make more and over time the distribution of coins is unequal with a small percentage of people holding a majority of the coins.

If you do not see how bitcoin addresses the distribution of wealth, then you need to look more closely. In the current environment dollars are printed and then given out to the wealthy, elite, powerful who then lend then out to everybody else with interest. Bitcoin has an initial distribution to the people who know and care about it, but as time goes on the overall distribution will be that the people who are best at providing goods and services will get the most money. Thus bitcoin will destroy the current system which favors the elite few by allowing true capitalism to progress.

[semaforo]

Very nice point and to that point I want to propose something - I mentioned it earlier but I guess people ignored it

What if all channels of accumulation were closed and distribution more uniform. Assuming you could guarantee each person a single unique wallet, when applied to Bitcoin it would look something like

1. Transaction fees are higher - say 10-15% and they are distributed equally over the network - this results in a steady flow of income for all users. I spend 100 Bitcoin, 10-15 bitcoins get spread to all users.

2. Negative interest on wallet balances - for example 4-5% of your wealth is redistributed automatically every X days if you don't spend it. I have 100 Bitcoin, I lose 4-5 bitcoins if i don't spend it X days - they get spread to all users.

With the end result (maybe) being that everyone has a steady stream of income and it is difficult if not impossible to accumulate coins as the more you have the more you lose hence very little motivation to save more than you can spend. It's very naive and crude but something like this can only work with a decentralized digital currency. I'm sure there are various ill side effects but it seemed interesting to think about it.

   If the deflation issue actually turn out to be real, then this might be a fix. This reminds me of the woergl. http://en.wikipedia.org/wiki/W%C3%B6rgl#The_W.C3.B6rgl_Experiment
As I remember there was a negative interest rate built into the currency which caused people to spend rather than hoard, and there was almost full employment whereas the rest of the country was around 50% unemployment. Then the government shut it down, saying it was a threat to sovereignity.
    These are good ideas, but ultimately a currency is only worth what people believe it is worth. It sounds like you could apply these ideas to a new coin- like devcoin, where 10% goes to miners and 90% goes to developers. I am starting to think that complementary cryptocurrencies are key to bitcoin's success.

[esenminer]

I think in terms of technology Bitcoin is revolutionary but I don't see how it could revolutionize our current economic system.

The key problem is that it does not address the distribution and accumulation of wealth. In fact the current mining system promotes this. People mine, collect coins, re-invest. Those with more coins can invest more and make more and over time the distribution of coins is unequal with a small percentage of people holding a majority of the coins.

If you do not see how bitcoin addresses the distribution of wealth, then you need to look more closely. In the current environment dollars are printed and then given out to the wealthy, elite, powerful who then lend then out to everybody else with interest. Bitcoin has an initial distribution to the people who know and care about it, but as time goes on the overall distribution will be that the people who are best at providing goods and services will get the most money. Thus bitcoin will destroy the current system which favors the elite few by allowing true capitalism to progress.

Capitalism / free-markets are the cause of the unequal distribution of wealth so I'm not sure what you mean here.

Assume you have a completely free-market, no government interference, regulation, taxation just bunch of people with Bitcoins. Even assume that everyone starts off with the same number of Bitcoins. Some people invest wisely, maybe start a business and make money, other people invest and fail and others will save. Over time some people have more some people have less. Those with more Bitcoin have extra so they might invest in other businesses and make even more Bitcoin. Over time Bitcoins accumulate with a small number of investors simply because only those with extra Bitcoin can invest. The number of Bitcoins is fixed so you then have a small group of people holding onto the majority of Bitcoins with a majority of people splitting what's left. Call the majority 'the wealthy, elite, poweful'.

This property exists in all capitalistic free-markets. It is capitalism's achilles heel. When the inequality goes to far people will tend to revolt and demand a more equitable system. Borrowing from an earlier post it might look something like

Tribalism ---> Feudalism ---> Capitalism -------->  Socialism --------> ?

[jdbtracker]

Bitcoin cannot resolve the problem of inequality in a society, It is only a program made to let people handle money in a revolutionary way. if you wish to distribute the wealth, why not? do it, it allows a lot of flexibility on how to do transactions.

But it does give an example where the creator thought to distribute the wealth of the many who use it to the many that support it. They gave us an example of selflessness, think about facebook, ebay, amazon etc, billions of dollars worth concentrated into a few individuals no more than 10,000 people, supporting complementary businesses that pay their workers minimum wage and these jobs soon will be replaced by robots... what will happen when wealth is concentrated that heavily?