My contrarian conspiracy theories.Friday I drove up the east coast. It was about a 5 hour drive with plenty of coffee. However, my radio was broken and so my mind started wandering. These are my contrarian BTC conspiracy theories.
The government will never outlaw bitcoins, transacting bitcoins, or mining.The common wisdom is that the government will, at some point, step in and make this currency illegal. While I agree that politicians lack creativity, they are advised (traditionally) by some very creative economists; Ben Bernanke and Henry Paulson for example. The following are ways in which a creative government could use the BTC network to it’s advantage.
1. As a Federal Reserve toolThe federal reserve could use BTC to control key inflation rates by buying and selling BTC. The traditional tool to combat inflation is to raise interest rates to pull liquidity out of the market -- making borrowing money more expensive. With a common Forex style BTC/USD they could effectively make dollars “appear” or “disappear” from the system. This could save our country from run-away inflation by something horrible -- say, printing 85 billion dollars a month to buy mortgage backed securities and treasuries on the open market. I know, who in their right mind would do that?
Let’s get slightly more sinister. They not only could use the system as a monetary tool by buying/selling. They could also have miners set up around the country (or world) in which they mine or don’t mine, raising or lowering the hash rate, and reward for mining. This would be manipulating the currency market. It wouldn’t be hard to do with almost 900 billion military budget.
So. Why can’t they do this with gold; buying and selling the GLD? I would argue that most large countries _are_ manipulating their currencies with gold. However, gold is no longer bought and sold as a physical commodity. It is typically bought (by non-millionaire, non-government investors) using an index that tracks it’s price. In the event of a crisis, investors/savers only have a piece of paper or number on a screen. This piece of paper/number could easily fall prey to something like a net worth tax ala Cypris. In addition, if you think that bitcoins are hard to buy and sell -- trying buying or selling a car with physical gold. You need third parties to verify that the substance offered is actually the gold quality the sellers/buyers say it is.
2. As a tool for currency war.The international community has been very worried about this recently as everyone from China, to the US to Japan are in a rush to devalue their currency. Why? Because the lower the value of your currency the more of it you get when doing international trade. While the value might not change, ask a stock trader if it matters that their company has grown it’s profits in the last year. Buying and selling stocks of companies based on metrics of this type like the P/E (Price to Earnings) ratio raises the market in general and gives confidence to the system.
So how could the United States use BTC to wage currency war?
The simple answer is that making BTC more attractive to investors, reduces the value of fiat money in _any_country by definition. The US can control the value of the Yen, by again injecting or removing BTC from the network. As long as the US is in a better position to handle an increase or decrease in the dollar vs BTC, they can force this change on foreign countries currency as well.
3. Let’s say they do...Yes. I the government does weird stuff that is counter intuitive all the time. Let’s say my conspiracy theory is wrong and they do take action against BTC. If they are creative, they will make owning more than a certain amount of hashing power per-miner illegal. See Marijuana and Guns. Why do this? Because they could set up their own block chain where they control greater than 50%. This would give them all the benefits of an alternative currency, combined with the backing of the “full faith” of the United States and they would still control the entire currency. Could you imagine the effect of printing money to buy their “BTC” version on the national debt? We could print to infinity to service our Bonds (debt vehicles) while never really losing any taxpayer value that was invested in a crypto currency.
4. Ignore the ASIC behind the curtain.Worrying about ASICS are out of the context of the macro discussion I believe. However, for fun I came up with a Contrarian Conspiracy Theory for those. Is it more interesting to believe that BFL sucks, or is mining the coins themselves? Or, perhaps men in black cars drove up and the Govt. ordered them to delay so that the “J. Edgers” could position themselves better for the future. Don’t mind me, just having some conspiracy fun
The 3ffBee3y3 have recently, in my opinion, indicated not to worry much about BTC -- which makes the argument that the Govt. will use this as a tool even more solidified.
5. Disclaimer:I’m a just a guy. I have no crystal ball. I trade in the market in ETFs, Variable Rate Bonds, Stocks etc. I am not an economist, tax professional, or professional trader/money manager. None of this should be construed as financial advice. I own ~.007 BTC
I simply am fascinated by it’s potential and like to play mental games with myself. I lurk these boards a great deal as they are interesting, but haven’t bothered to ask to be let out of n00bie world. I don’t have nearly as much to contribute as some of the informative things I’ve read here.
