So the banking reports say the ultimate risk bitcoin poses is...

[notig]

less demand for the dollar. It says that as long as bitcoin is exchanged for fiat the dollar is fine but if bitcoin starts to get into  a more closed cycle where people are trading bitcoin for bitcoin then this would reduce the demand for dollars.

Doesn't this mean that dollars would simply get an increased inflation (or decrease in value) since the same amount of dollars are chasing less goods since those goods that would have been taken care of with dollars are then taken care of with bitcoin instead?

[HairyMaclairy]

The concern is that they start losing control of the economy.  They cannot reduce interest rates when times are hard and increase interest rates during booms with the result that economic cycles will become more severe.

[Inedible]

The concern is that they start losing control of the economy.  They cannot reduce interest rates when times are hard and increase interest rates during booms with the result that economic cycles will become more severe.

Bitcoin adoption might kill off those cycles.

[HairyMaclairy]

The concern is that they start losing control of the economy.  They cannot reduce interest rates when times are hard and increase interest rates during booms with the result that economic cycles will become more severe.

Bitcoin adoption might kill off those cycles.

Indeed.  Although the current price volatility of btc suggests not yet.

[Peacefrog]

Would someone care to explain how bitcoin adoption would kill off these economic cycles? I'm really curious

[HairyMaclairy]

The GFC was partially caused by the Federal Reserve keeping interest rates too low prior to the GFC for far too long after the dot com bubble popped. When they finally pulled on the brakes we lost Bear Stearns and then Lehman Brothers and we have been dealing with the fall out ever since.

So arguably if the Fed had not screwed up badly in 2000 - 2006 we would not be here today.

Which makes bitcoin the grand experiment.  Of course bitcoin could also succeed and make the rich very rich and the poor very poor due to its deflationary structure returning the world's workers to the status of serfs to the tech elite.  That's also a risk.

[Ibian]

Would someone care to explain how bitcoin adoption would kill off these economic cycles? I'm really curious

Loans and defaults are largely to blame. When a big enough fish goes fin up it can cause a chain reaction. With bitcoin, as long as payment and financing is made in bitcoin and not paper promises, this will be impossible.

[Lloydie]

The GFC was partially caused by the Federal Reserve keeping interest rates too low prior to the GFC for far too long after the dot com bubble popped. When they finally pulled on the brakes we lost Bear Stearns and then Lehman Brothers and we have been dealing with the fall out ever since.

So arguably if the Fed had not screwed up badly in 2000 - 2006 we would not be here today.

Which makes bitcoin the grand experiment.  Of course bitcoin could also succeed and make the rich very rich and the poor very poor due to its deflationary structure returning the world's workers to the status of serfs to the tech elite.  That's also a risk.

No. This is not correct. With bitcoins, to gain economic benefits one must spend bitcoins. The rich will be less rich over time.

OTOH, the current fiat system allows rich people to create money out of thin air by getting banks to issue debt. The assets owned by rich people keep getting inflated up, no matter what. Therefore, the rich stay rich and in fact they will become even wealthier over time. That is how the 1% screw the 99%.

The gini coefficient in western countries is getting worse. The gini coefficient of bitcoin will improve the longer we use it.

[HairyMaclairy]

The GFC was partially caused by the Federal Reserve keeping interest rates too low prior to the GFC for far too long after the dot com bubble popped. When they finally pulled on the brakes we lost Bear Stearns and then Lehman Brothers and we have been dealing with the fall out ever since.

So arguably if the Fed had not screwed up badly in 2000 - 2006 we would not be here today.

Which makes bitcoin the grand experiment.  Of course bitcoin could also succeed and make the rich very rich and the poor very poor due to its deflationary structure returning the world's workers to the status of serfs to the tech elite.  That's also a risk.

No. This is not correct. With bitcoins, to gain economic benefits one must spend bitcoins. The rich will be less rich over time.

OTOH, the current fiat system allows rich people to create money out of thin air by getting banks to issue debt. The assets owned by rich people keep getting inflated up, no matter what. Therefore, the rich stay rich and in fact they will become even wealthier over time. That is how the 1% screw the 99%.

The gini coefficient in western countries is getting worse. The gini coefficient of bitcoin will improve the longer we use it.

Bitcoin is deflationary.  By definition you become richer if you do not spend it.

If you look at the Gini coefficient within bitcoin land it is worse than real life.

If bitcoin goes up another 1000x our whales will be the worlds richest people. Don't tell me bitcoin is egalitarian because it's not.

Satoshi will be the worlds first trillionaire if bitcoin goes to 1 million.

[Lloydie]

The GFC was partially caused by the Federal Reserve keeping interest rates too low prior to the GFC for far too long after the dot com bubble popped. When they finally pulled on the brakes we lost Bear Stearns and then Lehman Brothers and we have been dealing with the fall out ever since.

So arguably if the Fed had not screwed up badly in 2000 - 2006 we would not be here today.

Which makes bitcoin the grand experiment.  Of course bitcoin could also succeed and make the rich very rich and the poor very poor due to its deflationary structure returning the world's workers to the status of serfs to the tech elite.  That's also a risk.

No. This is not correct. With bitcoins, to gain economic benefits one must spend bitcoins. The rich will be less rich over time.

OTOH, the current fiat system allows rich people to create money out of thin air by getting banks to issue debt. The assets owned by rich people keep getting inflated up, no matter what. Therefore, the rich stay rich and in fact they will become even wealthier over time. That is how the 1% screw the 99%.

The gini coefficient in western countries is getting worse. The gini coefficient of bitcoin will improve the longer we use it.

Bitcoin is deflationary.  By definition you become richer if you do not spend it.

If you look at the Gini coefficient within bitcoin land it is worse than real life.

If bitcoin goes up another 1000x our whales will be the worlds richest people. Don't tell me bitcoin is egalitarian because it's not.

Gini coefficient of bitcoin monetary system will improve over time which is exactly what is not happening with the fiat money system. I'll take my chances with bitcoin instead of sticking to a system I know to be permanently unfair.

Yes, the whales will be wealthiest individuals on the planet but they have to spend it to get any value. They cannot simply borrow more bitcoins and create new bitcoins out of thin air.

Bitcoin is more egalitarian than the fiat debt monetary system we currently have, the longer we use it.

If satoshi becomes a trillionaire, he deserves it for eradicating debt slavery on planet earth. I have no problems with that. Anyway, I think satoshi will not spend his hoard. He does not think like you or I.

[HairyMaclairy]

What is the mechanism that will improve bitcoin's Gini coefficient.

[Lloydie]

What is the mechanism that will improve bitcoin's Gini coefficient.

Spending of bitcoins and the inability to sustain one's wealth via debt based inflation.

The gini coefficient of bitcoin was 1 five years ago.

[HairyMaclairy]

What is the mechanism that will improve bitcoin's Gini coefficient.

Spending of bitcoins and the inability to sustain one's wealth via debt based inflation.

The gini coefficient of bitcoin was 1 five years ago.

Deflation means that a dollar not spent today buys more tomorrow. 

[Lloydie]

What is the mechanism that will improve bitcoin's Gini coefficient.

Spending of bitcoins and the inability to sustain one's wealth via debt based inflation.

The gini coefficient of bitcoin was 1 five years ago.

Deflation means that a dollar not spent today buys more tomorrow.  

Yes. Computers double in power and the costs drop in half every single year, almost like clockwork, yet you are siting there typing on a computer. Why is that?

Did you actually buy a computer knowing it would be cheaper next year? Unbelievable!

[odolvlobo]

I don't think there is anything inherent in bitcoin that will prevent fractional reserve banking. Bitcoin won't solve that problem. I think it might even make it worse.