What if the US creates a competing currency?

[barbarousrelic]

There is no way the US government is going to promote a currency they can't manipulate. Not without a revolution.

[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.

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.

The banks compete with nobody. They only generate wealth to supplement their own power on the backs of monopolies on force.

Also, your last statement is a oxymoron. Patents only thrive in a coercive government environment. They are the very opposite of private.

[Prze_koles]

But what's the point? They already have something called dollar. Why bother creating another bitcoin-like currency? If they can print more bitcoins, they can tax it and see who is making transaction, then it's the same as dollar. No point.

[mikewillz]

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. 

+1

[barbarousrelic]

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

Ownership of the Fed is not really relevant. The Fed is controlled by both government and private interests. the Board of Governors is selected by the President and approved by the Senate. Private member banks elect six of the nine members of their Federal Reserve Bank's Board of Directors. (who in turn select the President of that certain Federal Reserve Bank, subject to approval by the Board of Governors)

The Federal Open Market Committee is made up of the Board of Governors, plus the President of the Federal Reserve Bank of New York, plus four other Reserve Bank Presidents on a rotating basis.

[mmdough]

The banks compete with nobody. They only generate wealth to supplement their own power on the backs of monopolies on force.

Also, your last statement is a oxymoron. Patents only thrive in a coercive government environment. They are the very opposite of private.

Well, okay, you're obviously using a very strict definition of 'private' here, but it's one that I frankly don't believe exists on any major scale in the modern USA.

I would argue that bitcoin is good precisely because it is 'private' in the sense that you seem to be using it. Any competition would be evil to the extent that it is in bed with government and central banking, thus not 'private.' But there is still a distinction between an organization funded by wealthy individuals with a motive to make a profit, and an organization funded by taxes and inflation with a motive to amass and exercise power.

[Jaime Frontero]

The banks compete with nobody. They only generate wealth to supplement their own power on the backs of monopolies on force.

Also, your last statement is a oxymoron. Patents only thrive in a coercive government environment. They are the very opposite of private.

ah.  we agree - patents are the payoff the wealthy get for supporting the government.

you must be a linux user...

[Explodicle]

I think they would have to avoid a flat tax if they wanted to remain competitive against Bitcoin. The days of taxed transactions (over free-market transaction fees) are numbered.

I am very concerned about neglecting this threat just because of perceived government incompetence. I'm sure many of you will passionately disagree, but I think a government which produced Tor has the capability of waging a very competent war against Bitcoin. We are not invincible and this shit may get very real. The advantages of being able to demand taxes in Fedcoin and demand that people accept it for debts may help a great deal... Maybe enough to overcome the inflation disadvantage.

[Jaime Frontero]

I think they would have to avoid a flat tax if they wanted to remain competitive against Bitcoin. The days of taxed transactions (over free-market transaction fees) are numbered.

I am very concerned about neglecting this threat just because of perceived government incompetence. I'm sure many of you will passionately disagree, but I think a government which produced Tor has the capability of waging a very competent war against Bitcoin. We are not invincible and this shit may get very real. The advantages of being able to demand taxes in Fedcoin and demand that people accept it for debts may help a great deal... Maybe enough to overcome the inflation disadvantage.

flat tax is not the issue.  how long it takes the government to see that a VAT is their only solution, is.

and a tax on consumption, rather than income, is the only possible way for the government to co-exist with a successful Bitcoin - or Bitcoin-like worldwide currency.

i agree that they could wage "... a very competent war against Bitcoin."  i'm just not so sure they can win.

[Tha Feds]

us government lol

[SgtSpike]

There is no way the US government is going to promote a currency they can't manipulate. Not without a revolution.

If they create their own blockchain with their own rules, they can manipulate it all they want.  That's my point.

But what's the point? They already have something called dollar. Why bother creating another bitcoin-like currency? If they can print more bitcoins, they can tax it and see who is making transaction, then it's the same as dollar. No point.

Sure, but the market thrives on efficiency.  And let's face it - if people can cut out credit card companies as a middle man, it would save stores/consumers a LOT of money.  So, if the market is headed towards bitcoin as a currency in the name of efficiency, then the government should want to create a similar currency to compete with bitcoin.

You can't send your friend money with a credit card.  That's why services like paypal are necessary.  Again, a currency like bitcoin cuts out the inefficient and unnecessary middlemen.

It's like saying "Why do we need calculators when we have abacuses?"  Well, duh. 

[againey]

But what's the point? They already have something called dollar. Why bother creating another bitcoin-like currency? If they can print more bitcoins, they can tax it and see who is making transaction, then it's the same as dollar. No point.

Sure, but the market thrives on efficiency.  And let's face it - if people can cut out credit card companies as a middle man, it would save stores/consumers a LOT of money.  So, if the market is headed towards bitcoin as a currency in the name of efficiency, then the government should want to create a similar currency to compete with bitcoin.

Markets might generally thrive on efficiency, but it typically seems like government-manipulated markets thrive on corruption, and my guess is that banks have a strong ability and strong motive to maintain credit cards and all the rest, since they make such a tidy profit off of it all.  For better or worse, market forces aren't the only forces at work here.

[SgtSpike]

But what's the point? They already have something called dollar. Why bother creating another bitcoin-like currency? If they can print more bitcoins, they can tax it and see who is making transaction, then it's the same as dollar. No point.

Sure, but the market thrives on efficiency.  And let's face it - if people can cut out credit card companies as a middle man, it would save stores/consumers a LOT of money.  So, if the market is headed towards bitcoin as a currency in the name of efficiency, then the government should want to create a similar currency to compete with bitcoin.

Markets might generally thrive on efficiency, but it typically seems like government-manipulated markets thrive on corruption, and my guess is that banks have a strong ability and strong motive to maintain credit cards and all the rest, since they make such a tidy profit off of it all.  For better or worse, market forces aren't the only forces at work here.

Well, I know that there are other forces at work.  But if the government hopes to keep people using the dollar, then the dollar has to become at least somewhat competitive.  Maybe I'm wrong, but it seems that if something like bitcoin becomes popular because of skipping out on the middleman, then the government would need to create something similar for the dollar to skip out on the middleman, or no one is going to use it.  That is, unless they just straight-out outlaw bitcoins, which is a possibility as well.

[barbarousrelic]

There is no way the US government is going to promote a currency they can't manipulate. Not without a revolution.

If they create their own blockchain with their own rules, they can manipulate it all they want.  That's my point.

If they are going to make it so a central authority can increase and decrease the money supply at will, there isn't much point to starting with the Bitcoin code, or being related to Bitcoin at all.

[imanikin]

The subject and the initial post are so full of the innate American arrogance, egotism and self-centeredness, that it looks like Astroturf to me.  As in previous such threads, the premise seems to be that if the US bans, doesn't completely accept something, or competes against it, it's doomed to failure and obscurity...

So, i'll just restate the reality of this century, rather than the last one:

The US population is 4% of the world population.
It makes ~27% of the world GDP, last i looked.
It's broke and in debt for the foreseeable future. The numbers are staggering!
Even its own government commissions predict that it will face a fiscal and currency collapse within this decade, if not 2-5 years.
Its government isn't ready to do anything except bicker about it.

Yet, even in this forum, the arrogant, pathological, astroturfy American FUD continues to flow, regarding how anything Americans or the US government doesn't embrace is DOA...    Maybe it's just a ploy to push the B price down a little to load up... 

[SgtSpike]

There is no way the US government is going to promote a currency they can't manipulate. Not without a revolution.

If they create their own blockchain with their own rules, they can manipulate it all they want.  That's my point.

If they are going to make it so a central authority can increase and decrease the money supply at will, there isn't much point to starting with the Bitcoin code, or being related to Bitcoin at all.

Except that it's a good way to have a secure electronic currency.  But I suppose you're right - they'd probably just want to come up with their own things that is "bigger and better" than bitcoin in whatever ways they try to convince us it is...

The subject and the initial post are so full of the innate American arrogance, egotism and self-centeredness, that it looks like Astroturf to me.  As in previous such threads, the premise seems to be that if the US bans, doesn't completely accept something, or competes against it, it's doomed to failure and obscurity...

So, i'll just restate the reality of this century, rather than the last one:

The US population is 4% of the world population.
It makes ~27% of the world GDP, last i looked.
It's broke and in debt for the foreseeable future. The numbers are staggering!
Even its own government commissions predict that it will face a fiscal and currency collapse within this decade, if not 2-5 years.
Its government isn't ready to do anything except bicker about it.

Yet, even in this forum, the arrogant, pathological, astroturfy American FUD continues to flow, regarding how anything Americans or the US government doesn't embrace is DOA...    Maybe it's just a ploy to push the B price down a little to load up... 

Mmmm, you're completely right.  I do keep forgetting about the rest of the world.  Bitcoin can survive with or without the US.  I guess I am thinking so US-centric because of the current state of our economy, and my constant fear of not having enough money to put food on the table.

[Explodicle]

flat tax is not the issue.  how long it takes the government to see that a VAT is their only solution, is.

I've seen this idea before, but I'm not clear why VAT is the exception. What about land value taxes and pollution taxes? Even a VAT could be evaded to some extent, depending on how far up the supply chain Bitcoin goes. Could someone elaborate?

[torbank]

It would certainly make it easier to deposit in Mt. Gox.
 

[bootmii]

But what's the point? They already have something called dollar. Why bother creating another bitcoin-like currency? If they can print more bitcoins, they can tax it and only they cansee who is making transaction, then it's the same as dollar. No point.

FTFY, but I agree anyway.

[bitbouillion]

I know, I am a little bit late but I was thinking of such an idea too recently.

What if the Federal Reserve System issues Dollarcoins instead of paper Dollars?

The FRBs maintains a blockchain and the hardware. Each block is signed off ("hashed") by (a) secret key(s), so only the FRBs can add blocks and users can verify the authenticity of the blocks via the FRBs public key(s). Compromising the secret keys is a security issue, but this is a technical detail (for sure there will be bulletproof solutions).  

1) The Dollarcoins will be substitutes of Dollar paper notes, Dollarcoins will become legal tender:
- for each worn paper note turned in to a FRB a Dollarcoin will be issued to the blockchain (it would not change the amount of currency in circulation)
- for collateral a private bank deposits with its FRB, the FRB will issue Dollarcoins to its blockchain instead of paper notes and lend it to the private banks (it would increase the currency in circulation in the same way as new Dollar paper notes are issued nowadays)
- there will be still the desired inflation on the Dollar

2) Private parties, banks, payment processors, governments, foreigners can transfer each other Dollarcoins:
- you can make bank deposits and withdrawals
- pay or accept payments for goods and services
- pay taxes or get a return from the IRS

3) Why would we still need banks?
- banks pay interest for deposited Dollarcoins [that's why inflation is "needed"]
- they provide loan, investment and other services

4) Benefits for the existing banking cartel
- replacing outdated, insecure, inefficient electronic payment systems (credit cards, debit cards, cheques, bank wires aso)
- bank runs are very short lived, since they can be handled electronically and the FRB can provide Dollarcoins in minutes
- they keep the status quo

5) Benefits for the government
- they can track each Dollarcoin and prosecuting money laundering, tax evasion, illegal use aso. much more  efficiently (finally ban paper notes)
- they get a more "stable" monetary system