bad money drives out good

[grondilu]

How do you know something like this isnt already happening ?

 If its a defensive thing it might be kept quiet and underground.

Ah, you'll know when it happens, imho. A black swan event like bitcoin taking over a significant portion of electronic transactions is going to cause untold chaos on currency markets alone, not to mention follow on ructions in any connected markets. The whole payments/monetary system and the western central banking model collapsed in 2007 anyways and was only propped up by tax-payer promises but that is now inevitably dragging govts. into bankruptcy. Markets will sense this coming first and start twitching before the spasms increase ... when that starts happening they'll attack.

I love that boiling bankster frog graphic ... give the frog a Bernanke face and replace the fire with glowering bitcoins as coals.

I like this idea of bitcoin being a monetary black swan.  I think it could make a nice symbol for bitcoin.  Anyone would like to design a corresponding logo?

[Anonymous]

How do you know something like this isnt already happening ?

 If its a defensive thing it might be kept quiet and underground.

Ah, you'll know when it happens, imho. A black swan event like bitcoin taking over a significant portion of electronic transactions is going to cause untold chaos on currency markets alone, not to mention follow on ructions in any connected markets. The whole payments/monetary system and the western central banking model collapsed in 2007 anyways and was only propped up by tax-payer promises but that is now inevitably dragging govts. into bankruptcy. Markets will sense this coming first and start twitching before the spasms increase ... when that starts happening they'll attack.

I love that boiling bankster frog graphic ... give the frog a Bernanke face and replace the fire with glowering bitcoins as coals.

I meant the racks of computing power coming online. By the time the banksters do it their computing power will be innefectual compared to the existing bitcoin clusters. The bitcoin network itself is already amongst the largest clusters on earth.

I think during the last difficulty increase someone even used idle time on a supercomputer.

[bitcool]

I like this idea of bitcoin being a monetary black swan.  I think it could make a nice symbol for bitcoin.  Anyone would like to design a corresponding logo?

Or, it can be a phoenix, you know, rising from the ashes.

[Geremia]

Here's a good description of Gresham's law:

Gresham's Law comes into play, when several types of money have a conversion ratio specified by legal tender laws, different from their market price.

For example, let's say the law sets the ratio at 20 ounces of silver for one ounce of gold; but the market price is 15. Any contract or debt in silver can be now paid in gold. So instead of expending 20 silver, the debtor will buy an ounce of gold for 15. As a result, no one will be willing to enter a contract quoted in silver.

The undervalued money will vanish from the market, bringing down prices quoted in it. Those still using it will likely find themselves in trouble, because they made debts and investments under the old price level and expected their incomes to be correspondingly higher. The 'good money' will be held by the users of money, or sold into other countries, where the local laws do not apply. This exchange of currencies takes time, while the supply of money shrinks. [But this can't happen with BTC] This produces a temporary deflationary effect.

The Law is a special case of the usual effects of price controls by government: in this case, the government’s artificial fixing of an exchange rate between two or more moneys creates a shortage of the artificially under-valued money and a surplus of the over-valued money.

Couldn't the Fed artificially fix "an exchange rate between" USD and BTC such that USD would be "the over-valued money" and BTC "the artificially under-valued money"?

[Spendulus]

The most likely result would not be a directed and focused assault against bitcoin, but controls against currency flight.  Limits on how much you can move out of your country.  In that bill someone is one sentence that makes the law apply to bitcoin, even though a movement into bitcoin is not a movement geographically.

And that might be done by Executive Order.

Gresham's Law, bad money drives out good, is always followed by a second phase in which good money drives out bad.

[barbarousrelic]

Couldn't the Fed artificially fix "an exchange rate between" USD and BTC such that USD would be "the over-valued money" and BTC "the artificially under-valued money"?

If they tried continually buying Bitcoin at above market value, the price of Bitcoin would skyrocket, and the Fed would have to keep spending exponentially more money to get a greater fraction of the Bitcoin supply.

If they tried buying Bitcoin at less than market value, nobody would sell to them.

[Spendulus]

....Couldn't the Fed artificially fix "an exchange rate between" USD and BTC such that USD would be "the over-valued money" and BTC "the artificially under-valued money"?

Sure.  Many governments have tried such things, and a black market develops to compensate for the differences in values.  Those are already in place all over the world.  But yes, the stupid things that governments did yesterday are to be repeated tomorrow.

The problem is this.  Suppose that a government placed restrictions on Bitcoin.  Then in that country, someone....a police officer, a judge, a politician....wants to buy a $6 replacement battery for his cell phone.  He looks on Ebay (etc) and finds the cheapest, easiest way to buy it is from Hong Kong with Bitcoin.  A couple clicks later it's done.

Aggregate those individual purchasing decisions by millions or billions and you have the behavior of nations.  Some laws are simply disregarded.