What if the US creates a competing currency?

[SgtSpike]

What I mean is, what if the US takes the bitcoin code, starts their own block chain that allows them to print extra currency whenever they like, sets up a few dozen Thash of servers to secure it, and then offers to the general public that they can exchange their real dollars 1:1 for this virtual currency?  Advantages (for the government) would include preventing people from switching over to bitcoin, being able to flat-tax EVERY transaction made by only accepting transaction fees above a certain percentage of the transaction being made, being able to track every person's account balance/income accurately, etc.

It's a bit scary to think about.   

I think something like this happening is a very real possibility in the not-to-distant future.  While many people here have good reasons for rejecting inflationary or central currencies, I can see that the general public is a bit more trusting of the government than a group of geeks.  If the government did carry through with something like this, it is invariable that they would outlaw bitcoins, and bitcoins would simply be kept to the realm of geeks, idealists, and black market transactions.

[stic.man]

the global aspects of bitcoin could still make it viable as well as the non-inflationary nature of the system

[TraderTimm]

Your scenario assumes a government that is more competent than a free-ranging pack of internet geeks and crypto experts. Given their track record, I don't agree. More likely is they will try their 'best' to fight the fledgling currency, leading to their loss of power to do anything about personal transactions and/or overall taxation.

In a desperate attempt to find relevance, they may actually have to start producing value and cut politician salaries to keep the capitol building and other government stuctures in good repair. Perhaps it may even force fiscal responsibility, restructuring the dollar to compete. However it turns out, their days are numbered and they better not waste them by attacking the very system that could save us all.

[jerfelix]

What I mean is, what if the US takes the bitcoin code, starts their own block chain that allows them to print extra currency whenever they like, sets up a few dozen Thash of servers to secure it, and then offers to the general public that they can exchange their real dollars 1:1 for this virtual currency? 

How do you know that Bitcoin wasn't started by the US Government?

[Anonymous]

What I mean is, what if the US takes the bitcoin code, starts their own block chain that allows them to print extra currency whenever they like, sets up a few dozen Thash of servers to secure it, and then offers to the general public that they can exchange their real dollars 1:1 for this virtual currency? 

How do you know that Bitcoin wasn't started by the US Government?

They're too incompetent to come up with this. Governments are just the retarded puppets of the central banks. If anything, the central banks came up with it which is doubtful since it brings the power to the people.

[ocharry]

Well Bitcoin isn't a 'one country' currency though, it's worldwide. So the US alone wouldn't be able to create a competing currency. Or so I think

[evoorhees]

Doing this would mean the US Gov admits it's currency, the US Dollar, is dead. That will never happen.

Further, half the appeal of Bitcoin is that it can't be inflated. So if the US Gov made a competing p2p currency which they could inflate, who would bother with it? Not me.

[Anonymous]

So if the US Gov made a competing p2p currency which they could inflate, who would bother with it? Not me.

It's called WoW Gold and Linden Dollars, haha.

[Timo Y]

Hah.

Most politicians still don't get bittorrent, a decade after it was invented.

Do you expect them to get the concept of a p2p cryptocurrency? 

[Jaime Frontero]

Your scenario assumes a government that is more competent than a free-ranging pack of internet geeks and crypto experts. Given their track record, I don't agree. More likely is they will try their 'best' to fight the fledgling currency, leading to their loss of power to do anything about personal transactions and/or overall taxation.

In a desperate attempt to find relevance, they may actually have to start producing value and cut politician salaries to keep the capitol building and other government stuctures in good repair. Perhaps it may even force fiscal responsibility, restructuring the dollar to compete. However it turns out, their days are numbered and they better not waste them by attacking the very system that could save us all.

i agree with this:

Your scenario assumes a government that is more competent than a free-ranging pack of internet geeks and crypto experts.

...except one must note that there are really a lot of extremely competent people in government.  the problem is, they are competent at government - that is, at the system they're a part of.

perhaps it would be more accurate to say "...more nimble than a free-ranging pack of internet geeks and crypto experts."

as for what the government is likely to do... i think they'll try the steamroller approach.  they always seem to.  it will fail - mostly due to the internationalization of Bitcoin and the animosity the US government has earned over the past 50 years or so (i speak as a US citizen, incidentally).

it will be an unsettled time.

but then, i think there will be some form of rapprochement.  there won't be much choice.

let's keep in mind that there really are some very intelligent and competent people in the US government - the president comes to mind, like him or not - and if co-existence is the best option (in the mid-term) they will take it.

[WilliamJohnson]

Governments are not incompetent, in terms of Computer Science: government agencies have huge funds, and some very competent people.
Politicians however... I still remember one of our ministers (French minister of culture) talking about OpenOffice as a firewall

[mmdough]

Couldn't a private entity do this just as well, though, perhaps with the blessing and endorsement of the Fed? That would seem like the logical way to retain control over the monetary supply in the digital world.

Bitcoin would still be competitive against Fedcoin, but any hope of widespread acceptance would be shot.

But I think the cure for this is the same as it ever was: a fully functional bitcoin economy. Without a broad base of merchants, bitcoin is vulnerable in oh so many ways.

[Anonymous]

Governments are not incompetent, in terms of Computer Science: government agencies have huge funds, and some very competent people.
Politicians however... I still remember one of our ministers (French minister of culture) talking about OpenOffice as a firewall

It doesn't matter how many skilled people the governments have. They simple do not have the market incentive to produce great innovations. They can become innovative but with a massively inefficient use of funds and resources, that if said funds were used in a viable scenario they would produce so much more.

Governments are not to be looked up to when it comes revolutionary change in technology or otherwise.

[Anonymous]

Couldn't a private entity do this just as well, though, perhaps with the blessing and endorsement of the Fed? That would seem like the logical way to retain control over the monetary supply in the digital world.

Large grants do not provide much incentive either. True market demand is always more viable.

[SgtSpike]

Doing this would mean the US Gov admits it's currency, the US Dollar, is dead. That will never happen.

Further, half the appeal of Bitcoin is that it can't be inflated. So if the US Gov made a competing p2p currency which they could inflate, who would bother with it? Not me.

Well I was thinking along the lines of a new form of dollar.  They still use the same terminology, and the value would be the same (at least at first), it's just virtual instead of actual handheld dollars.

I agree with you about the value of bitcoin in that it cannot be inflated.  However, if Bitcoins were outlawed, the masses would choose the Fedcoin, regardless of its inflationary nature.

And you're assuming everyone else thinks that deflation is a good thing.  Many people, including many economists, believe that a slight amount of inflation is entirely necessary for a healthy economy.

And you're also assuming everyone else knows what inflation/deflation actually means, and why one would be better than the other, which is probably not the case here in the good old USA.

The only way Bitcoin would win out over a competing Federal currency is with a GREAT deal of marketing.  Which, if it's illegal, marketing it would probably be made illegal too. 

[gigitrix]

World > US.

[rebuilder]

Why would anyone choose the Fedcoin over regular Dollars with the credit card infrastructure it already has etc.

[Jaime Frontero]

Couldn't a private entity do this just as well, though, perhaps with the blessing and endorsement of the Fed? That would seem like the logical way to retain control over the monetary supply in the digital world.

Bitcoin would still be competitive against Fedcoin, but any hope of widespread acceptance would be shot.

But I think the cure for this is the same as it ever was: a fully functional bitcoin economy. Without a broad base of merchants, bitcoin is vulnerable in oh so many ways.

last i heard, the Fed is a private entity.  opinions differ, but they are intended to.

[Anonymous]

Couldn't a private entity do this just as well, though, perhaps with the blessing and endorsement of the Fed? That would seem like the logical way to retain control over the monetary supply in the digital world.

Bitcoin would still be competitive against Fedcoin, but any hope of widespread acceptance would be shot.

But I think the cure for this is the same as it ever was: a fully functional bitcoin economy. Without a broad base of merchants, bitcoin is vulnerable in oh so many ways.

last i heard, the Fed is a private entity.  opinions differ, but they are intended to.

The fed is neither a private or public entity. It's a monster of its own. It belongs to the central banks.

[mmdough]

Couldn't a private entity do this just as well, though, perhaps with the blessing and endorsement of the Fed? That would seem like the logical way to retain control over the monetary supply in the digital world.

Bitcoin would still be competitive against Fedcoin, but any hope of widespread acceptance would be shot.

But I think the cure for this is the same as it ever was: a fully functional bitcoin economy. Without a broad base of merchants, bitcoin is vulnerable in oh so many ways.

last i heard, the Fed is a private entity.  opinions differ, but they are intended to.

The fed is neither a private or public entity. It's a monster of its own. It belongs to the central banks.

Well... yeah, but it's a private monster of its own, inasmuch as it's not public.

That's why I think a private firm makes more sense than a government initiative. Government doesn't see a need to compete, but a private group could make it profitable with patents and technology bundling.

But, on the other hand,

Why would anyone choose the Fedcoin over regular Dollars with the credit card infrastructure it already has etc.

is an excellent point.