The irony of the Bitcoin guinea pig.

[lunarboy]

A small thought exercise into the future suggests that at one point Bitcoin will win over some struggling national economies. Argentina seems to be the goto example here, but it could equally be Venezuela, Belarus or any number of African nations. When the economy of 'poor corrupt country with hyperinflation' noticeably starts to fail all wealth will head to the only possible escape route; cryptocurrency.

So now we have the situation where the most corrupt, most ill managed, economically reckless country has an entirely Bitcoin based economy. However the rich and powerful from this country will still be the rich and powerful, except now their wealth is in Bitcoin and hence rapidly increasing in comparative value to the rest of the lagging world.

As we all know this first mover advantage will probably be huge, the most mismanaged mess of a country could become a new global superpower, with its exponentially increasing wealth. Unfortunately those is charge will still be at the top, their existing social policies, will still remain, they will still control most of the wealth.


It's going to the morbidly fascinating to watch but i'm struggling to see how Bitcoin will not reward the 'worst' first mover with large rewards and initially exacerbate political divides in the world ?

[Lethn]

When did you become a soothsayer? You haven't even taken into account the fact that Bitcoin cannot be taxed or confiscated, there's also the fact that any changes a government tries to make to the source code is immediately going to be spotted if they try anything. I can certainly predict that governments may go ahead and hire people to make their own cryptographic currency to suit their needs, maybe even update the code to force businesses and people to accept high transaction fees to fund the country but that's the most they'll be able to do. People will always have the choice now to just ditch the currency they're using and move onto a different one instead on a whim and if they have an alternative like Bitcoin I really doubt they're going to stick around for another Freicoin where the majority of your profit is taken from you through the code.

Any government that adopts Bitcoin is going to have to be intelligent enough to realise they can't control it and that's a tall order for politicians.

[lunarboy]

I'm not sure if your trolling or missing the point. I mentioned noting about changing the source code?

I figured It was implied that the generally excepted arguments of Bitcoin will apply. Obviously bitcoin can't be taxed, but in a corrupt mismanaged system they can certainly be confiscated. 'would that be minus one finger or two with your password sir ?' and the borders can be closed.

The point I was hopefully trying to debate was that the assuming full wealth transfer into Bitcoin in the above scenario the rich and powerful will still be rich and powerful. (As they too have fled to bitcoin) They still control the army police and hence people. Further as they had the worst run economy and hence the first to fully turn to entirely bitcoin economy they will be rewarded with greatest increase in its future price.

Corrupt governments contain corrupt people, those at the top would surely be looking after their own wealth before that of the people and hence most likely to keep it.

[Lethn]

How are they going to get into the wallet even if they do confiscate it? Supposedly the FBI don't even have all the coins they confiscated from Silk Road because the guy in charge had the sense to put a password on his wallet. These guys can't even operate an email address or website without fucking it up so what makes you think they know anything about using a cryptocurrency? Also the police and the army aren't going to stick around if their governments currency collapses and they won't get paid.

[lunarboy]

How are they going to get into the wallet even if they do confiscate it?

Rubber-hose

what makes you think they know anything about using a cryptocurrency?

google tells all, beside in the senario the entire wealth of the economy has been fled to bitcoin.

Also the police and the army aren't going to stick around if their governments currency collapses and they won't get paid.

Again the entire economy has now moved to bitcoin. The wealthy/powerful are still paying the armed forces just in cryptocurrency.
 

[Lethn]

Yeah, you just aren't being realistic.

[jballs]

The interesting thing to me is so many of you have never lived outside of a credit card world.

you young whippersnappers when I was your age...

we used cash.

Yes BTC has some unique features that cash doesn't. But they figured out how to collect cash taxes long before the modern system. They could easily do the same with crypto and they will. If you want to business and engage in commerce you have to pay taxes willingly (coercively) or face the punishments by the establishment. Crypto may make it easier to evade but not by much. If you are employed there is a record of it, sell property there is a record of it, and etc.

I had a friend who smuggled a lot of cash out of the country in semi legal fashion. But the gov  He was audited and they didn't know what he took or where but figured out he was short, and assessed a fine and said he could pay it or go to prison. That is how bitcoin would be taxed too. They don't need access to it, they only need access to you.

As for the notion that bitcoin will suddenly revolutionize the system, end corruption, all of the hopium being smoked around here, I don't see why it would. People are people, and they are corruptible, and when the bitcoin billionaires take the reins they will be susceptible to evil and manipulation and control.  IN fact they may be worse, I think a lot of the hi tech community really looks down on the masses as if they are not even the same species. The two really do not understand each other. That is dangerous as empathy is at a minimum, and empathy holds a society together above all.

I do think it will be a net positive though, just a fascinating transition and really would keep an open mind and expect to be surprised by how it all unfolds.

[lunarboy]

As for the notion that bitcoin will suddenly revolutionize the system, end corruption, all of the opium being smoked around here, I don't see why it would. People are people, and they are corruptible, and when the bitcoin billionaires take the reins they will be susceptible to evil and manipulation and control.  IN fact they may be worse,

Somebody gets it.

The perspective amongst many is that everyone lives in a laissez faire democracy. The countries that will first suffer economic collapse of their corrupt fiat system, will still have wealthy at the top and poor at the bottom. The internal propaganda machines will cover up the problems just long enough until the elite have managed to exchange their useless pesos, rubles or somalian shillings for bitcoin or other forms of wealth. Then bring on hyper inflation and let everyone else take the fall. These same elite will then stand back and watch their early adopter advantage reel in super wealth as bitcoin price rises.

[Wilikon]

The interesting thing to me is so many of you have never lived outside of a credit card world.

you young whippersnappers when I was your age...

we used cash.

Yes BTC has some unique features that cash doesn't. But they figured out how to collect cash taxes long before the modern system. They could easily do the same with crypto and they will. If you want to business and engage in commerce you have to pay taxes willingly (coercively) or face the punishments by the establishment. Crypto may make it easier to evade but not by much. If you are employed there is a record of it, sell property there is a record of it, and etc.

I had a friend who smuggled a lot of cash out of the country in semi legal fashion. But the gov  He was audited and they didn't know what he took or where but figured out he was short, and assessed a fine and said he could pay it or go to prison. That is how bitcoin would be taxed too. They don't need access to it, they only need access to you.

As for the notion that bitcoin will suddenly revolutionize the system, end corruption, all of the hopium being smoked around here, I don't see why it would. People are people, and they are corruptible, and when the bitcoin billionaires take the reins they will be susceptible to evil and manipulation and control.  IN fact they may be worse, I think a lot of the hi tech community really looks down on the masses as if they are not even the same species. The two really do not understand each other. That is dangerous as empathy is at a minimum, and empathy holds a society together above all.

I do think it will be a net positive though, just a fascinating transition and really would keep an open mind and expect to be surprised by how it all unfolds.

The thing that makes bitcoin bitcoin is the math, no need to trust a human being. Human nature is more in touch with a debt based society than a bitcoin society. People see credit cards as free money. Bitcoiners buying Lamborghini and Tesla, etc. nothing wrong with this but... I haven't seen Red Cross Bitcoin or something similar thus far.
One thing is to see another system than the banking system but for us to believe bitcoin will change our heart? Hmmm... Doubt it.

So I agree.

[Spendulus]

As for the notion that bitcoin will suddenly revolutionize the system, end corruption, all of the opium being smoked around here, I don't see why it would. People are people, and they are corruptible, and when the bitcoin billionaires take the reins they will be susceptible to evil and manipulation and control.  IN fact they may be worse,

Somebody gets it.

The perspective amongst many is that everyone lives in a laissez faire democracy. The countries that will first suffer economic collapse of their corrupt fiat system, will still have wealthy at the top and poor at the bottom. The internal propaganda machines will cover up the problems just long enough until the elite have managed to exchange their useless pesos, rubles or somalian shillings for bitcoin or other forms of wealth. Then bring on hyper inflation and let everyone else take the fall. These same elite will then stand back and watch their early adopter advantage reel in super wealth as bitcoin price rises.

This is wrong, most likely.  I assert this from having studied history of economic inflation and hyperinflation.  You are referring to one case of a substitute currency coming into play and gradually gaining dominance.

This has happened many times.  It is inevitable in any country with severe currency problems.  But it does not play out like you project.

[lunarboy]

As for the notion that bitcoin will suddenly revolutionize the system, end corruption, all of the opium being smoked around here, I don't see why it would. People are people, and they are corruptible, and when the bitcoin billionaires take the reins they will be susceptible to evil and manipulation and control.  IN fact they may be worse,

Somebody gets it.

The perspective amongst many is that everyone lives in a laissez faire democracy. The countries that will first suffer economic collapse of their corrupt fiat system, will still have wealthy at the top and poor at the bottom. The internal propaganda machines will cover up the problems just long enough until the elite have managed to exchange their useless pesos, rubles or somalian shillings for bitcoin or other forms of wealth. Then bring on hyper inflation and let everyone else take the fall. These same elite will then stand back and watch their early adopter advantage reel in super wealth as bitcoin price rises.

This is wrong, most likely.  I assert this from having studied history of economic inflation and hyperinflation.  You are referring to one case of a substitute currency coming into play and gradually gaining dominance.

This has happened many times.  It is inevitable in any country with severe currency problems.  But it does not play out like you project.

I'm listening. How do you think this scenario will play out? Bearing in mind all studies of hyperinflation will have no precedent here as the replacement currency 'bitcoin' will probably be hyperdeflationary in the coming years, and thus more than counter any effect.

[Spendulus]

Okay.  This:

The internal propaganda machines will cover up the problems just long enough until the elite have managed to exchange their useless pesos, rubles or somalian shillings for bitcoin or other forms of wealth. Then bring on hyper inflation and let everyone else take the fall. These same elite will then stand back and watch their early adopter advantage reel in super wealth as bitcoin price rises.

Is completely backwards.  The power of the collectivists is in their fiat and control of it.  Infiltration of "substitute currencies" occurs from the bottom, the little people buying things in the market, ebay, where ever.  This is fought against with laws, propaganda, and policing power.  Eventually the substitute currency comes to be or has to be used by the ruling elite, by the police and so forth.

The ruling elite are NEVER the EARLY ADOPTERS.  It is a radical fringe minority who are that.

However, these two dynamics are not completely separate.  Even while a member of the ruling elite is ordering heads chopped off for dealing in the "bad evil foreign money", he is taking bribes under the table in that same money.

Also, hyper inflation is very different from moderate to severe inflation.   Hyperinflation is not good for anyone, the ruling elite are also hit by it.  Rich people are landlords, and suddenly their rent streams are worthless, while they must pay bills in exponentially larger amounts.

[lunarboy]

Okay.  This:

The internal propaganda machines will cover up the problems just long enough until the elite have managed to exchange their useless pesos, rubles or somalian shillings for bitcoin or other forms of wealth. Then bring on hyper inflation and let everyone else take the fall. These same elite will then stand back and watch their early adopter advantage reel in super wealth as bitcoin price rises.

Is completely backwards.  The power of the collectivists is in their fiat and control of it.  Infiltration of "substitute currencies" occurs from the bottom, the little people buying things in the market, ebay, where ever.  This is fought against with laws, propaganda, and policing power.  Eventually the substitute currency comes to be or has to be used by the ruling elite, by the police and so forth.

The ruling elite are NEVER the EARLY ADOPTERS.  It is a radical fringe minority who are that.

However, these two dynamics are not completely separate.  Even while a member of the ruling elite is ordering heads chopped off for dealing in the "bad evil foreign money", he is taking bribes under the table in that same money.

Also, hyper inflation is very different from moderate to severe inflation.   Hyperinflation is not good for anyone, the ruling elite are also hit by it.  Rich people are landlords, and suddenly their rent streams are worthless, while they must pay bills in exponentially larger amounts.

Maybe my imagination is tilted to one side slightly, but I still can't how this scenario would make a difference? As the currency collapses, there will presumably be a mass exodus into any other form of wealth be it gold, property, bitcoin or whatever. Some in this scenario will no doubt be quicker on the uptake than others, although i'd guess generally the small town sheep farmer with his cash under the bed will not be as prepared as the rich banker, politician or  whatever fat cat.

lead on to the point when hyperinflation has run its course, terrible as that is, and the currency is deemed worthless. Then out of necessity bitcoin has been adopted by everyone. Now whilst this is obviously terrible for all concerned and maybe there will be some fairly serious wealth re-distribution between earlier and later adopters, the country as a whole, on a global scale is an early adopter.  Ergo the rich elite still remain at the top of the pyramid becasue they owned things of real value before; that despite currency collapse will remain valuable after.

 Here in lies the irony, despite plundering the riches of their own people and driving the currency into the ground. This country will on a global scale, be rewarded for being early adopters. The worst managed country and hence the first to fall, will see the biggest returns from going all in on bitcoin, yet the rich and corrupt will still be rich and corrupt.

[Spendulus]

Okay.  This:

The internal propaganda machines will cover up the problems just long enough until the elite have managed to exchange their useless pesos, rubles or somalian shillings for bitcoin or other forms of wealth. Then bring on hyper inflation and let everyone else take the fall. These same elite will then stand back and watch their early adopter advantage reel in super wealth as bitcoin price rises.

Is completely backwards.  The power of the collectivists is in their fiat and control of it.  Infiltration of "substitute currencies" occurs from the bottom, the little people buying things in the market, ebay, where ever.  This is fought against with laws, propaganda, and policing power.  Eventually the substitute currency comes to be or has to be used by the ruling elite, by the police and so forth.

The ruling elite are NEVER the EARLY ADOPTERS.  It is a radical fringe minority who are that.

However, these two dynamics are not completely separate.  Even while a member of the ruling elite is ordering heads chopped off for dealing in the "bad evil foreign money", he is taking bribes under the table in that same money.

Also, hyper inflation is very different from moderate to severe inflation.   Hyperinflation is not good for anyone, the ruling elite are also hit by it.  Rich people are landlords, and suddenly their rent streams are worthless, while they must pay bills in exponentially larger amounts.

Maybe my imagination is tilted to one side slightly, but I still can't how this scenario would make a difference? As the currency collapses, there will presumably be a mass exodus into any other form of wealth be it gold, property, bitcoin or whatever. Some in this scenario will no doubt be quicker on the uptake than others, although i'd guess generally the small town sheep farmer with his cash under the bed will not be as prepared as the rich banker, politician or  whatever fat cat.

lead on to the point when hyperinflation has run its course, terrible as that is, and the currency is deemed worthless. Then out of necessity bitcoin has been adopted by everyone. ....

The farmer IS PREPARED.  During the 1921-1922 Weimer hyperinflation, the farmers would go into town and do crazy stuff, like buying a high class grand piano for four sacks of potatoes.  The farmer had hard goods.  Inflation and hyperinflation is nothing more than the preference  of the consumer for hard goods rather than currency.

The mass exodus into other forms of wealth is never quick enough.  Human habits are hard things to break.  Before they know it their savings and wealth has vanished.

Yes bitcoin adds new dynamic to these things and in fact it may prevent the possibility of a hyperinflation.  Let me try to explain what that new dynamic is. 

Suppose the hyper is looming and people think, maybe they better diversify a bit.  SOME are goldbugs, they've already done that.  But 98% of the people, they look around and notice that the only bank accounts available are USD (or whatever the local currency is).  They say, "gee, not so easy to get a stash of some other currency - they have me locked in!.  But no problem, I'll just stock up on hard goods."

Now if the guy is comfortable with multiple currencies, uses them and has bank accounts in them, he's got no problem.  But few people do - and the countries like it that way. 

Now consider the situation same as above, 2% goldbugs, 98% just with USD.  Some of those though are using bitcoin (nothing more or less than a substitute currency but one that's very rapidly adoptable)  As the fiat worthless pressure mounts, market forces cause a shift to the bitcoin.  It becomes commonly used on the street.  The fiat starts to fade away in importance, although the government still prints it like crazy.

What happens is that the human suffering that occurs in a hyperinflation/severe inflation cannot occur.

[lunarboy]

 The farmer had hard goods.  Inflation and hyperinflation is nothing more than the preference  of the consumer for hard goods rather than currency.

The mass exodus into other forms of wealth is never quick enough.  Human habits are hard things to break.  Before they know it their savings and wealth has vanished.

Obviously farmer was a poorly chosen example as he will have relatively high physical wealth as he creates goods and owns land, perhaps I should have used retired teacher living off savings. Nevertheless you raise an Interesting point. I haven't studied economic history, other than a passing interest, i'll have to take your word that some precedent has been set here. As you say hyperinflation is essentially nothing more than an exponential rush away from government issued fiat into whatever form of secure asset is available it pianos or bitcoin.

However, What I don't understand is why you think this will significantly change the status quo? The most poor will remain poor and most rich rich. The rich already have vast non fiat wealth, houses, stocks (outside the country wealth too) gold ect. The change I forsee is simple those with the highest % exposure to local fiat currency over goods and possessions will suffer the most. This will occur across the board rich or poor. Many members of each group will suffer and many will 'competitively' gain. (vastly oversimplifed) but general status quo unaffected.

This seems to be drifting away from the original premise though; in that, however you see the details of a hyperinflation event playing out. When the dust settles, the country will still have to trade a currency. If we take it that bitcoin has filled this gap, the country will be bitcoin rich.

Now if we go on the assumption that bitcoin continues its huge price increase Do you not think a vast reward will be had by the entire country that first manages to debase its currency to the point nobody wants it, and successfully drives its population to use bitcoin? Argentinian citizens for example have almost no other options. Convert you increasingly useless currency for physical wealth or into bitcoin. If this trajectory continues Argentia, will on a global level have a relatively high bitcoin per captia as they all become early bitcoin adopters, The government, through financial suicide and corruption will have essential been rewarded for their inaction, with a newly wealthy, early adopting bitcoin nation.

Yes bitcoin adds new dynamic to these things and in fact it may prevent the possibility of a hyperinflation.

Bitcoin definitely brings a new dynamic to the situation, with any luck it will cancel out some of the worst problems of a hyperinflation event. However I don't think bitcoin can prevent hyperinflation. If anything it will accelerate it. (on the assumption that you mean hyperinflation is WTR local fiat, and not bitcoin price?)

[Spendulus]

 The farmer had hard goods.  Inflation and hyperinflation is nothing more than the preference  of the consumer for hard goods rather than currency.

The mass exodus into other forms of wealth is never quick enough.  Human habits are hard things to break.  Before they know it their savings and wealth has vanished.

Obviously farmer was a poorly chosen example as he will have relatively high physical wealth as he creates goods and owns land, perhaps I should have used retired teacher living off savings. Nevertheless you raise an Interesting point. I haven't studied economic history, other than a passing interest, i'll have to take your word that some precedent has been set here. As you say hyperinflation is essentially nothing more than an exponential rush away from government issued fiat into whatever form of secure asset is available it pianos or bitcoin.

However, What I don't understand is why you think this will significantly change the status quo? The most poor will remain poor and most rich rich. The rich already have vast non fiat wealth, houses, stocks (outside the country wealth too) gold ect. The change I forsee is simple those with the highest % exposure to local fiat currency over goods and possessions will suffer the most. This will occur across the board rich or poor. Many members of each group will suffer and many will 'competitively' gain. (vastly oversimplifed) but general status quo unaffected.

This seems to be drifting away from the original premise though; in that, however you see the details of a hyperinflation event playing out. When the dust settles, the country will still have to trade a currency. If we take it that bitcoin has filled this gap, the country will be bitcoin rich.

Now if we go on the assumption that bitcoin continues its huge price increase Do you not think a vast reward will be had by the entire country that first manages to debase its currency to the point nobody wants it, and successfully drives its population to use bitcoin? Argentinian citizens for example have almost no other options. Convert you increasingly useless currency for physical wealth or into bitcoin. If this trajectory continues Argentia, will on a global level have a relatively high bitcoin per captia as they all become early bitcoin adopters, The government, through financial suicide and corruption will have essential been rewarded for their inaction, with a newly wealthy, early adopting bitcoin nation.

Yes bitcoin adds new dynamic to these things and in fact it may prevent the possibility of a hyperinflation.

Bitcoin definitely brings a new dynamic to the situation, with any luck it will cancel out some of the worst problems of a hyperinflation event. However I don't think bitcoin can prevent hyperinflation. If anything it will accelerate it. (on the assumption that you mean hyperinflation is WTR local fiat, and not bitcoin price?)

I think it's fair to say...not "bitcoin but ready availability of ANY substitute currency that can be readily adopted".   

Nothing will prevent hyperinflation if they powers that be want to run the presses.  But a fiat currency can become worthless through not being trusted, and this is different than hyperinflation.  Some currencies you just don't want, and it has nothing to do with hyperinflation.  North Korea might be an example.  Hard to exchange it for something else.  Etc.

hyperinflation is WTR local fiat, and not bitcoin price?

Yes, bitcoin price would/could/might hyperdeflate.

It'd be absolutely fascinating to watch bitcoin duel it out with a national currency in some nation like Argentina.  We'll probably have numerous such spectacles unfold in the next five years.

[lunarboy]

It'd be absolutely fascinating to watch bitcoin duel it out with a national currency in some nation like Argentina.  We'll probably have numerous such spectacles unfold in the next five years.

Fascinating definitely, but only from an academic point of view. I really foresee the huge disruption that the 'bitcoin effect' will have, as being nothing short of disastrous for vast amounts of people. Saying breaking eggs and omelets just doesn't cut it here. The mid game of this whole 'experiment' gets VERY messy for some countries and people. What plan is being prepared? How will the populations of these soon to be failed states be looked after when the bitcoin typhoon smashes down everything they know?

[Spendulus]

It'd be absolutely fascinating to watch bitcoin duel it out with a national currency in some nation like Argentina.  We'll probably have numerous such spectacles unfold in the next five years.

Fascinating definitely, but only from an academic point of view. I really foresee the huge disruption that the 'bitcoin effect' will have, as being nothing short of disastrous for vast amounts of people. Saying breaking eggs and omelets just doesn't cut it here. The mid game of this whole 'experiment' gets VERY messy for some countries and people. What plan is being prepared? How will the populations of these soon to be failed states be looked after when the bitcoin typhoon smashes down everything they know?

That is the nature of disruptive technology.

But if, as I hypothesize, ecurrency makes the suffering from hyperinflations and severe inflations a thing of the past, then what has happened is that a disruptive technology prevented a lot of disaster for people, while bringing some of its own.

If the aggregate of billions of small purchasing and currency decisions by individuals leads to the demise or shrinking or irrelevance of the nation state, so be it.

William Gibson in his various science fiction books made an interesting point.  At some places he had characters talking about nations and countries, but the characters didn't know much about them.  Someone then says what country they live in and another person asks "What does a country do?"  

Some really good books on what it's like to live in hyperinflation are Paarsons "Dying of Money" and "The Black Obelisk" by Eric Maria Remarque.  A person can read these and ask the "what if bitcoin ...." question.

[jballs]

Are you aware of the disastrous effects that deflation had prior to the advent of designed inflation?

At the end of the 19th century there was a major political upheaval around the issue of bimetalism. Using silver as a currency as well as gold. The problem was all the producers who profited from the economy would inevitably end up with all of the gold. They were rich, and always took in more gold than they spent. So the rest of the economy would be periodically starved, until they spent enough gold to generate economic activity again. William Jennings Bryan had a stump speech where he declared that the masses were being crucified on a cross of gold.

Their solution at the time was to Increase the money supply by adding silver as a mainstream currency. The gold owners hated the idea because it diluted their control of the monetary system. The fight went on through to the creation of the fed and the eventual outlaw of gold holdings. 

A bitcoin economy would have the same problem. Also you all seem to miss that people depend on financing to buy homes and cars and education etc. so there will be a very real need for loans. If bitcoin maintains a constant increase in value over time it will not benefit borrowers, as they will have to repay loans with increasingly more value, meaning the creditors benefit from both interest and currency appreciation. 

These are reasons people will choose a fiat currency and what we will most likely have is both bitcoin and fiat operating in tandem. Some uses will favor bitcoin, others fiat. It isn't going to replace fiat, unless fiat completely fails on its own accord. Possible and maybe even certain for periods of time. But not permanently. Every hyperinflation ends after the upheaval and people change the system. After the Weimar episode Germany emerged as one of the strongest economies in the world.

[lunarboy]

^ Infinite divisibility ^

deflationary currency or Inflationary ? which one would you hold?