In a Dollar/US markets crash, what % of the public will have no money at all?

[Carlton Banks]

Obviously, even the reaction of the lowest latency trading bots that are programmed to handle even the widest possible price range scenarios won't be quick enough to stop the price going parabolic in minutes. So the liquidity won't vanish instantly. But there will quickly be no bitcoins to buy, at any price.

So how much damage could a diabolical crash wreak? The percentage of people with some BTC to hold is small right now, less than 0.1% of the world's population, no doubt.
If poor and (cash) wealthy alike got their money turned into Zimbabwe dollars in a matter of hours, the consequences are perhaps unimaginable. When denial gave way to panic or anger, we could be talking about hundreds of millions of people all over the world going out of their minds.

Is such a crash credible? Dollar doomsday cultists have been saying this since the whole Nixon-reneges-on-Bretton Woods incident, and we've all kept going (kicking the can...) throughout. Is it at all feasible for these gross imbalances in debts owed compared to economic output produced to unwind in a long, drawn out fashion? I'm not convinced that there won't be at least one sudden jolt in the markets, and that's got some pretty cataclysmic potential, if that jolt is a genuine realisation that the party's over.

So how much can that change the world? When so many people still have faith in the incumbent monetary system, what will the outcome be, short, medium and long term? Could this be why the establishment media are giving bitcoin a hearing at all, because they're afraid that too many angry mobs will be too unpredictable? It seems like they could still pretty much ignore it if they wanted to, when you think about the purely trade related impact that bitcoin is having up to now (a fraction of world commerce similar to the fraction of holders).

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[MatTheCat]

Obviously, even the reaction of the lowest latency trading bots that are programmed to handle even the widest possible price range scenarios won't be quick enough to stop the price going parabolic in minutes. So the liquidity won't vanish instantly. But there will quickly be no bitcoins to buy, at any price.

So how much damage could a diabolical crash wreak? The percentage of people with some BTC to hold is small right now, less than 0.1% of the world's population, no doubt.
If poor and (cash) wealthy alike got their money turned into Zimbabwe dollars in a matter of hours, the consequences are perhaps unimaginable. When denial gave way to panic or anger, we could be talking about hundreds of millions of people all over the world going out of their minds.

Is such a crash credible? Dollar doomsday cultists have been saying this since the whole Nixon-reneges-on-Bretton Woods incident, and we've all kept going (kicking the can...) throughout. Is it at all feasible for these gross imbalances in debts owed compared to economic output produced to unwind in a long, drawn out fashion? I'm not convinced that there won't be at least one sudden jolt in the markets, and that's got some pretty cataclysmic potential, if that jolt is a genuine realisation that the party's over.

So how much can that change the world? When so many people still have faith in the incumbent monetary system, what will the outcome be, short, medium and long term? Could this be why the establishment media are giving bitcoin a hearing at all, because they're afraid that too many angry mobs will be too unpredictable? It seems like they could still pretty much ignore it if they wanted to, when you think about the purely trade related impact that bitcoin is having up to now (a fraction of world commerce similar to the fraction of holders).

Not this line again.

Look dude, If the dollar crashes, all world currencies crash as they presently largely backed by US dollars. And yes, if all currencies crash, then Bitcoin, which is based upon its interchangeability between currency, is also going to nothing.

In such a doomsday scenario, its precious metals or go home. But I would suggest that we would all have bigger things to worry about than how many more potatoes extra our silver rounds could buy is in a post dollar world.

[zimmah]

if all fiat crashes i don't think bitcoin will crash, bitcoin is not backed by dollars (and it's a good thing it's not)

the only problem is that when all fiat collapses, the civil unrest that will follow may destroy much of the economy, and there may not be much left to buy.

and PM won't help you in that case either, at least not in the short term. The only thing that will help you in such scenarios is guns and ammo, farm-able land, livestock, tobacco and coffee(to barter with addicts), clean water, some kind of electricity generator maybe, that kind of stuff.

You;d basically have to rebuild society from scratch, and bitcoin may become extremely valuable AFTER society has rebuild itself from a total collapse. Just like PM.

[Carlton Banks]

if all fiat crashes i don't think bitcoin will crash, bitcoin is not backed by dollars (and it's a good thing it's not)

the only problem is that when all fiat collapses, the civil unrest that will follow may destroy much of the economy, and there may not be much left to buy.

and PM won't help you in that case either, at least not in the short term. The only thing that will help you in such scenarios is guns and ammo, farm-able land, livestock, tobacco and coffee(to barter with addicts), clean water, some kind of electricity generator maybe, that kind of stuff.

You;d basically have to rebuild society from scratch, and bitcoin may become extremely valuable AFTER society has rebuild itself from a total collapse. Just like PM.

I don't know, it depends on the extent of the crash. Could there be some reason why the dollar holds on to some value? Or maybe renmimbi might hold up to some extent (after getting rid of it's dollar peg, of course). There are huge areas of the developing world that just don't have the internet infrastructure, or high enough prevalence of computing devices, to switch immediately.

I agree that money of any type wouldn't be anything like as valuable as simply owning intrinsic commodities to begin with, the policing situation could be appalling in some places. But imagine somewhere rich and sparsely populated like Norway or Sweden (not to mention the inhospitable climate...). I reckon they'd probably weather the storm better than most, as it'd be easier to maintain peace in the streets, and the ability to subsist on the local agriculture wouldn't be seriously threatened. How densely populated areas would cope... well, you'd sensibly "head for the hills" in an instant if you could.

[Peter R]

Obviously, even the reaction of the lowest latency trading bots that are programmed to handle even the widest possible price range scenarios won't be quick enough to stop the price going parabolic in minutes. So the liquidity won't vanish instantly. But there will quickly be no bitcoins to buy, at any price.

So how much damage could a diabolical crash wreak? The percentage of people with some BTC to hold is small right now, less than 0.1% of the world's population, no doubt.
If poor and (cash) wealthy alike got their money turned into Zimbabwe dollars in a matter of hours, the consequences are perhaps unimaginable. When denial gave way to panic or anger, we could be talking about hundreds of millions of people all over the world going out of their minds.

Is such a crash credible? Dollar doomsday cultists have been saying this since the whole Nixon-reneges-on-Bretton Woods incident, and we've all kept going (kicking the can...) throughout. Is it at all feasible for these gross imbalances in debts owed compared to economic output produced to unwind in a long, drawn out fashion? I'm not convinced that there won't be at least one sudden jolt in the markets, and that's got some pretty cataclysmic potential, if that jolt is a genuine realisation that the party's over.

So how much can that change the world? When so many people still have faith in the incumbent monetary system, what will the outcome be, short, medium and long term? Could this be why the establishment media are giving bitcoin a hearing at all, because they're afraid that too many angry mobs will be too unpredictable? It seems like they could still pretty much ignore it if they wanted to, when you think about the purely trade related impact that bitcoin is having up to now (a fraction of world commerce similar to the fraction of holders).

Interesting post Carlton.  My take is that if a dollar crisis were to occur, it would come after the market crash, and that it would unfold over the course of several months.  People will be in denial that the monetary system is imploding, thinking that TPTB will regain control, even after price levels increase by a factor of 10 (see Weimar inflation chart). 

Here's a draft of one possible plot line:

Sometime in 2014 or 2015--perhaps after the start of "tapering" by the US Fed, or perhaps after war breaks out in the East China Sea--the US stock markets crash hard.  The US dollar strengthens, as the collective consciousness still views this as a safe-haven asset.  A huge amount of assumed wealth vanished from the markets, and, with pressure from pension funds and bankers, the Fed attempts a more aggressive reflation.  But the game is up.  Something has finally shattered our collective confidence: perhaps Krugman gets his trillion dollar platinum coin, or perhaps real helicopter drops finally occur.  But whatever it is, the people have woken up to the silliness of the Federal Reserve system.

Meanwhile, the Winklevoss ETF had been approved several months earlier and bitcoin is now valued at $8000.  As confidence in the USD is starting to shatter, hot money everywhere is looking for a home.  Some goes into reflating stocks, more goes into gold, and a little goes into bitcoin too.  Since the bitcoin market cap is still small, the price skyrockets.  The rapid price rise gets media attention like nothing we have seen so far.  Suddenly, economists who once bashed bitcoin now see it as a possible escape hatch to preserving wealth, without society going back to the stone age (like a sudden shift to a gold standard may entail).  There is a mad dash into bitcoin...

The price quickly passes $40,000, then $100,000 and then things just get stupid: the ETF can no longer even acquire additional coins.  Multi-millionaires who wrote it of as "video game" credits, are now willing to trade million-dollar homes for a single bitcoin.  But the bitcoin holders are nervous too.  They stopped accepting US dollars, and given the chaos in the world, they too are desperate to hedge into physical assets such as gold and real estate.  Everyone with money is just trying to hedge. 

At the end of the shake-out: the dinosaur billionaires are now just multi-millionaires, bitcoin holders now own productive assets and real estate, and regular Joe on the street effectively gets his mortgage and other debts written off.  This is the great Jubilee.

Several bitcoin whales are now the richest individuals the world has ever seen.  This leads to a society similar to what James Dale Davidson and Lord William Rees-Mogg described in their novel The Sovereign Individual: Mastering the Transition to the Information Age.

[Sergios]

The US dollar will not likely crash because too many filthy rich people have a keen interest in keeping the current currency system. Crashes that destabilize an entire nation are very rare, look at Argentina a few years back Btw the Argentina case was because that country filed for bankruptcy. The thinking that Bitcoin and other crypto currencies would survive is ludicrous because if the currency is worthless you can't pay your workers so no or very limited electricity, which means no internet (only for government functions  but if the currency falls the government will fall 2) and no crypto currency.
No that "doomsday" scenario can be boarded up because it will never happen. I think if everything is controlled by a wealthy group it will be a resource grab under the guise of "helping" this or that particular country while plundering said countries resources. But if we go down that road we are giving in to the conspiracy bs. Not saying secret organisations do not exist or do not have any power but so long the ruling elite has the power firmly in their grip no weird scenarios like you are stating will occur.

[beetcoin]

The US dollar will not likely crash because too many filthy rich people have a keen interest in keeping the current currency system. Crashes that destabilize an entire nation are very rare, look at Argentina a few years back Btw the Argentina case was because that country filed for bankruptcy. The thinking that Bitcoin and other crypto currencies would survive is ludicrous because if the currency is worthless you can't pay your workers so no or very limited electricity, which means no internet (only for government functions  but if the currency falls the government will fall 2) and no crypto currency.
No that "doomsday" scenario can be boarded up because it will never happen. I think if everything is controlled by a wealthy group it will be a resource grab under the guise of "helping" this or that particular country while plundering said countries resources. But if we go down that road we are giving in to the conspiracy bs. Not saying secret organisations do not exist or do not have any power but so long the ruling elite has the power firmly in their grip no weird scenarios like you are stating will occur.

WTF are you talking about? you need to explain why printing out $1+ trillion per year is not going to dilute the value of the USD, and how the wealthy elite (who are controlling the dollar) can prevent this from happening.

saying "the wealthy elite are so powerful that they will prevent a crash from happening" is not enough. comparing argentina's economy to the U.S. economy is apples to oranges. if/when the biggest, most powerful economy in the world crashes, it will be a cascading domino effect that everyone in china, europe, middle east, africa, asia, central/south america will feel.

[Carlton Banks]

Interesting post Carlton.  My take is that if a dollar crisis were to occur, it would come after the market crash, and that it would unfold over the course of several months.  People will be in denial that the monetary system is imploding, thinking that TPTB will regain control, even after price levels increase by a factor of 10 (see Weimar inflation chart).  

Here's a draft of one possible plot line:

Sometime in 2014 or 2015--perhaps after the start of "tapering" by the US Fed, or perhaps after war breaks out in the East China Sea--the US stock markets crash hard.  The US dollar strengthens, as the collective consciousness still views this as a safe-haven asset.  A huge amount of assumed wealth vanished from the markets, and, with pressure from pension funds and bankers, the Fed attempts a more aggressive reflation.  But the game is up.  Something has finally shattered our collective confidence: perhaps Krugman gets his trillion dollar platinum coin, or perhaps real helicopter drops finally occur.  But whatever it is, the people have woken up to the silliness of the Federal Reserve system.

Meanwhile, the Winklevoss ETF had been approved several months earlier and bitcoin is now valued at $8000.  As confidence in the USD is starting to shatter, hot money everywhere is looking for a home.  Some goes into reflating stocks, more goes into gold, and a little goes into bitcoin too.  Since the bitcoin market cap is still small, the price skyrockets.  The rapid price rise gets media attention like nothing we have seen so far.  Suddenly, economists who once bashed bitcoin now see it as a possible escape hatch to preserving wealth, without society going back to the stone age (like a sudden shift to a gold standard may entail).  There is a mad dash into bitcoin...

The price quickly passes $40,000, then $100,000 and then things just get stupid: the ETF can no longer even acquire additional coins.  Multi-millionaires who wrote it of as "video game" credits, are now willing to trade million-dollar homes for a single bitcoin.  But the bitcoin holders are nervous too.  They stopped accepting US dollars, and given the chaos in the world, they too are desperate to hedge into physical assets such as gold and real estate.  Everyone with money is just trying to hedge.  

At the end of the shake-out: the dinosaur billionaires are now just multi-millionaires, bitcoin holders now own productive assets and real estate, and regular Joe on the street effectively gets his mortgage and other debts written off.  This is the great Jubilee.

Well, I have to credit you for an interesting reply.

You're imagining a multi-stage process at the level of the interaction between markets and geo-politics to trigger a dollar crash, and the evidence to support the case for a preamble to those circumstances is developing weekly. An event to precipitate a US stock market crash is such an obvious blue touch-paper moment, it's a signal to the public in general that "something's wrong [again] and you're probably not going to understand the explanation, even once you've heard it a dozen times [because it's a propagandised propaganda campaign to propagandise the coming propaganda to propagandise you with]". The scapegoat gets hung out on the washing line and that story probably serves the purpose of taking some long sought after action.

And I think that's where the real unknowns lie. What's the scapegoat, and the distraction that pretends to be that action to take care of the naughty scapegoat? There's only really subtle hints that a Chinese conflagration will be what it all pivots around, there's just not enough demonisation of the Chinese people or state in the popular media to make that stick too well. There's also a huge Chinese ex-pat community everywhere all over the world, it's too difficult to dehumanise these people successfully. I find it hard to believe that the US could provoke the nations around the East China Sea to start any meaningful conflict with each other. I can't help but see that, in big-picture terms, these nations all have more to gain from playing the US against itself, promoting a conflict that never actually happens, keeping the US caught in trying to push one of them into firing the first shot, but never succeeding. If you know the way these things are gamed by the big imperial-style powers, you would prepare for exactly that by proposing a strategy of playing along with the tension heightening. And this region has the US's conniving tactics pretty fresh in it's memory.

The Iranian situation is looking more like it's defused; everyone's taken a few steps back from a conflict, despite the occasional shuffles forward from the US and occasional moonlit howls from hawkish Isrealis. Syrian situation is much calmer, although doubtless not quite a genteel garden party just yet. Iraq is still bubbling away though. As is North Africa.

It all seems a little unprecedented, it's strange to say it, but whatever proposed event is needed to excuse the US's demise is a little difficult to reconcile with public awareness to the backstory needed to sell it. Conflict in Syria just couldn't be sold to the public or to policymakers. Conflict with Iran likewise. It's going to take a really carefully planned piece of stage management to redirect the blame under these circumstances. Or maybe the fallout will be severe enough that public opinion doesn't even have to be treated as a factor.

Several bitcoin whales are now the richest individuals the world has ever seen.  This leads to a society similar to what James Dale Davidson and Lord William Rees-Mogg described in their novel The Sovereign Individual: Mastering the Transition to the Information Age.

Not heard of the book, sounds pretty curious from the title though (fits the bitcoin idealogue's self-perception, for sure). Transition to the Information Age is surely the big theme of this century, 1970's-2000's was the information age equivalent to the initial invention of the steam engine. We've only started to get a grasp of how to use the potential in this technology we're re-building the world with.

[Ibian]

The housing bubble. Cyprus. The fact that the american police drive around in goddamn tanks. Homeland defense buying ~300 bullets/american.

I believe there will be cataclysmic financial disasters in the near future. And that they will happen with little to no warning as we have seen so far. The key then, for us, is to spread awareness of an alternative. We have a few years, maybe. Five tops. Spread the word.

[beetcoin]

The housing bubble. Cyprus. The fact that the american police drive around in goddamn tanks. Homeland defense buying ~300 bullets/american.

I believe there will be cataclysmic financial disasters in the near future. And that they will happen with little to no warning as we have seen so far. The key then, for us, is to spread awareness of an alternative. We have a few years, maybe. Five tops. Spread the word.

yeah this pretty much. what is frustrating is that most people i know either don't care or just don't know about it... because they are safe and warm, at least for now.

[Qoheleth]

The question really comes down to "how bad is bad"?

See, while our internet funny money has good properties from a classical-economic point of view, its operation very much depends on having a functional, decent-bandwidth, low-latency global-scale communications network available. Without that, the network cannot reach consensus and double-spending becomes trivial provided that you can arrange for an output to be spent in two different cities at once.

So first off, any scenario where the world monetary system collapses, but Bitcoin rises from its ashes, depends on things not collapsing to the point that generally-available access to the internet becomes no longer feasible.

Second off, even in such a scenario, Bitcoin would have competition in the form of the old standby - that is, negotiable precious metal. There are accounts today denominated in GAU and GAG. People hoard junk silver bags in case the world goes all "Mad Max" because they think it's a logical fall-back currency. Bitcoin has its advantages, but would people immediately think to flee there, rather than to PMs or "the physical economy" (stocks and the like, which represent ownership of real factories and storefronts and operations)? Gold accounts and promissory notes issued by "trusted" banks could easily step in instead, if Bitcoin isn't both well-known and ready for everyday use (including user-friendly rock-solid wallets and functional physical bearer instruments).