"Failure to Understand Bitcoin Could Cost Investors Billions" (Bitcoin's flaws)

[sidhujag]

Big wrench in altcoin.. coinpayments closing down because FinCEn classifies then as a money transmitter..

They would need to apply anti money laundering procedures to verify accounts and record keeping... I believe a proper company can step in here.. heck even bucket shop forex brokers and market makers comply why cant a crypto business do the same??? looks like coinpayments doesnt want to bother.

Crypto-currencies can be exchanged decentralized. So we can just put a decentralized exchange in front of Bitpay or any merchant accepting BTC.

The decentralized exchanges are not yet well developed. And as I said upthread, users may not use them if there is no compelling reason (because they are perceived to be less convenient, greater bid/ask spread+variance), but they can help users remain anonymous.

Im not talking about exchange coins but paymeny processors via third party need to follow regulation now. My business which was to accept devcoin litecoin bitcoin cant happen via unregulated third party processor now.. Cp did the job of ensuring payments are secure before fwding them on to a service you implement.. so i would just recieve coins with order info and a tx.. im sure i can do without but its more work.

Now im pretty sure my business which provides products in exchange for coins may need to be regulated too but im not sure if that classifies as money transmitter.

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[AnonyMint]

Detailed discussion of the problems with Zerocoin:

https://bitcointalk.org/index.php?topic=470987.msg5580855#msg5580855

The biggest problem with any "ZeroCoin" is that Bitcoin was never truly designed or meant to be anonymous nor decentralized and thus any attempt to create a clone for that purpose will be snuffed out by the banks and governments of the world.  

They have zero chance of widespread success but I suppose it makes for a nice hobby.

How can they snuff out something when they can't identify any of those who own the coin?

Paying for physical merchandise is an issue. But I will concede that market to Bitcoin and go after all the virtual merchandise, which will eventually be a larger market (as 3D printing in the home becomes prevalent).

The way they make counterfeit dollars illegal and few use them even though many could print their own dollars and do it well.

Most people would not risk prison given it's easy to track IP addresses and even physical hardware or software wallets.

And ZERO businesses would accept an illegal currency.

So then you'd be relegated to pure underground use, for things like drugs as only people willing to break the law would risk prison for a currency.

And that's being snuffed out, they would use national security to ban any truly anonymous currency saying a terrorist could easily buy bombs and maneuver through society using such anonymity and drug dralers as well.

Of course that's a lie, terrorists can be anonymous now with cash even more easily and so can drug dealers but who can fight the machine when they only need one executive order to kill anything and now, anyone.

I believe allmuch of the economy will be forced underground by the collapse of the $150 trillion global debt bomb (which will attempt to confiscate all wealth and destroy all business at its end-game). Ignition is 2016ish.

I believe it will become illegal to write many kinds of software, to create 3D printer designs that compete with the factories owned by the old capital, etc..

A new age is upon us.

This paradigm shift will tear to shreds our current reality.

Ready for the Jetsons?

I believe many (most?) of you are not ready. You are still thinking in terms of this world we have now which is propped up by $150 trillion in funny money. Pull away that veneer and you have remaining those who are useless in the hitech world coming and those are useful. Make sure you are in the latter.

[AnonyMint]

Big wrench in altcoin.. coinpayments closing down because FinCEn classifies then as a money transmitter..

They would need to apply anti money laundering procedures to verify accounts and record keeping... I believe a proper company can step in here.. heck even bucket shop forex brokers and market makers comply why cant a crypto business do the same??? looks like coinpayments doesnt want to bother.

Crypto-currencies can be exchanged decentralized. So we can just put a decentralized exchange in front of Bitpay or any merchant accepting BTC.

The decentralized exchanges are not yet well developed. And as I said upthread, users may not use them if there is no compelling reason (because they are perceived to be less convenient, greater bid/ask spread+variance), but they can help users remain anonymous.

Im not talking about exchange coins but paymeny processors via third party need to follow regulation now. My business which was to accept devcoin litecoin bitcoin cant happen via unregulated third party processor now.. Cp did the job of ensuring payments are secure before fwding them on to a service you implement.. so i would just recieve coins with order info and a tx.. im sure i can do without but its more work.

Now im pretty sure my business which provides products in exchange for coins may need to be regulated too but im not sure if that classifies as money transmitter.

I already explained the potential technical solution for paying businesses with a real-time conversion on decentralized exchange, but yeah it won't help you if your business can be regulated by the authorities. You could change jurisdictions or change the business model to anonymous.

My prediction is that if you don't, Obama and Merkel and Hollande, etc will destroy your business eventually. I see really bad times coming.

[sidhujag]

Big wrench in altcoin.. coinpayments closing down because FinCEn classifies then as a money transmitter..

They would need to apply anti money laundering procedures to verify accounts and record keeping... I believe a proper company can step in here.. heck even bucket shop forex brokers and market makers comply why cant a crypto business do the same??? looks like coinpayments doesnt want to bother.

Crypto-currencies can be exchanged decentralized. So we can just put a decentralized exchange in front of Bitpay or any merchant accepting BTC.

The decentralized exchanges are not yet well developed. And as I said upthread, users may not use them if there is no compelling reason (because they are perceived to be less convenient, greater bid/ask spread+variance), but they can help users remain anonymous.

Im not talking about exchange coins but paymeny processors via third party need to follow regulation now. My business which was to accept devcoin litecoin bitcoin cant happen via unregulated third party processor now.. Cp did the job of ensuring payments are secure before fwding them on to a service you implement.. so i would just recieve coins with order info and a tx.. im sure i can do without but its more work.

Now im pretty sure my business which provides products in exchange for coins may need to be regulated too but im not sure if that classifies as money transmitter.

I already explained the potential technical solution for paying businesses with a real-time conversion on decentralized exchange, but yeah it won't help you if your business can be regulated by the authorities. You could change jurisdictions or change the business model to anonymous.

My prediction is that if you don't, Obama and Merkel and Hollande, etc will destroy your business eventually. I see really bad times coming.

Actually ya come to think of it ya just a few rpc calls would do it if there was an exchange built into
my node..  Hopefully it happens to help out the business side of things.

[AnonyMint]

https://bitcointalk.org/index.php?topic=507784.msg5602408#msg5602408

All those who think crypto-currency should be unregulated are implicit (de facto) members of the Dark Enlightenment, and are delusional if they think it can happen without anonymity being built-in to the coin.

The linked article in the OP implies the powers-that-be (not politicians, I mean the truly powerful who control the DEEP STATE) are aware they need to regulate Bitcoin.

[Zarathustra]

I believe allmuch of the economy will be forced underground by the collapse of the $150 trillion global debt bomb (which will attempt to confiscate all wealth and destroy all business at its end-game). Ignition is 2016ish.

I believe it will become illegal to write many kinds of software, to create 3D printer designs that compete with the factories owned by the old capital, etc..

A new age is upon us.

This paradigm shift will tear to shreds our current reality.

Ready for the Jetsons?

I believe many (most?) of you are not ready. You are still thinking in terms of this world we have now which is propped up by $150 trillion in funny money. Pull away that veneer and you have remaining those who are useless in the hitech world coming and those are useful. Make sure you are in the latter.

You're a dreamer. You really believe that there will still be something like a hightech world around when all debt (=money) with its just-in-time economy and -society has gone? It means dark age, but with the difference of 500 nuclear reactors and fuel pools not being cooled anymore. That's not the same as the infrastructure in ancient rome, egypt, maya etc., where pyramids and aqueducts only were left behind.

[AnonyMint]

I believe the gains made by the super intelligent who are freed from the chains of socialism will rectify issues such as that, c.f. cryptographic expert Daniel Bernstein's struggle to be free to do research.

For example, Toshiba has a design for a 20MW solid-state nuclear reactor that doesn't need to be mechanically cooled.

"On a poetic note, I can dream can't I, and that is a start..."

[Zarathustra]

I believe the gains made by the super intelligent who are freed from the chains of socialism will rectify issues such as that, c.f. cryptographic expert Daniel Bernstein's struggle to be free to do research.

For example, Toshiba has a design for a 20MW solid-state nuclear reactor that doesn't need to be mechanically cooled.

"On a poetic note, I can dream can't I, and that is a start..."

Toshiba is a centralist, hypercollectivist monster.

[AnonyMint]

What does that have to do with whether the technology exists to improve nuclear?

I hope you realize energy is regulated and taxed such that it is controlled by cartels. Getting rid of that doesn't imply a Dark Age, rather it frees us to realize innovations which were suppressed because they are paradigm shifts which compete with the cartels.

[DoubleSwapper]

What does that have to do with whether the technology exists to improve nuclear?

I hope you realize energy is regulated and taxed such that it is controlled by cartels. Getting rid of that doesn't imply a Dark Age, rather it frees us to realize innovations which were suppressed because they are paradigm shifts which compete with the cartels.

AnonyMint, I realize you are a very intelligent man and I enjoy reading your posts because they address many glaring problems others might realize but either subconciously or deliberately ignore to protect their investments or agendas.
My question to you though is because I have read your prediction about the burst of a $ 150 trillion debt bubble multiple times in your posts how you think such an event will unfold.

To whom is the world in debt exactly and how does this creditor force the government(s) to act as his debt collector(s)? From my understanding of your scenario it will lead to a widespread pauperization of the world respectively the majority of the people. Do you predict a simultaneous increase in the creditor's wealth or is this a scenario where basically everybody gets poorer?

With both scenarios (further concentration of wealth/obliteration of wealth) I see several problems that make this scenario seem unlikely.

1) The widespread confiscation of wealth would inevitably weaken or even nearly eradicate consumerism which is one of the strongest motors to our society and one of the most effective measures for the elite to concentrate wealth at the same time by concentrating the production to satisfy consumerism.  What would the elite gain by basically wiping out most people's spending capacity?
This would in either case harm the creditor by either obliterating his own wealth or at least a lot of possibilities to spend his own wealth.
2) Do all relevant governments work on this collectively? From my current observations of international politics it seems as this is not the case most of the time. Why would it be the case in this event and wouldn't it create opportunities for backstabbing and breaking of the agreement to confiscate all wealth?
3) What boundaries are set for the governments in this scenario? Are concepts like democratic elections or consistency with the constitution still applicable in this case? If not what changes and what keeps governments from doing now what you predict for 2016?

I hope you can answer some of these potential problems/questions as the theory seems pretty far-fetched in my opinion. I would rather fear a global nuclear war at the moment.

Looking forward to hearing from you.     

[AnonyMint]

About the imminent conflagrapocalpyse...

What does that have to do with whether the technology exists to improve nuclear?

I hope you realize energy is regulated and taxed such that it is controlled by cartels. Getting rid of that doesn't imply a Dark Age, rather it frees us to realize innovations which were suppressed because they are paradigm shifts which compete with the cartels.

AnonyMint, I realize you are a very intelligent man and I enjoy reading your posts because they address many glaring problems others might realize but either subconciously or deliberately ignore to protect their investments or agendas.
My question to you though is because I have read your prediction about the burst of a $ 150 trillion debt bubble multiple times in your posts how you think such an event will unfold.

To whom is the world in debt exactly and how does this creditor force the government(s) to act as his debt collector(s)? From my understanding of your scenario it will lead to a widespread pauperization of the world respectively the majority of the people. Do you predict a simultaneous increase in the creditor's wealth or is this a scenario where basically everybody gets poorer?

As I explained in an upthread post (which I am too rushed to go find the link to at the moment), the ledger of who owes whom is less important consideration than the fact that it represents $150 trillion of human capital that was misdirected in its activities since mid-1980s and especially since 1994 or so when the debt-based economy accelerated (1994 is when Clinton had the equations for official statistics changed so they can unleash the surge).



(note we have inflation of fractional reserve digits which is why official stats lie about inflation to hide its relevance, but simultaneously we have a deflation of M0 which official stats also lie about by including bank deposits held Federal Reserve (which should be monetary base MB not M0), thus MB is hockey stick but the Fed doesn't show us the true M0. The Fed is trying to hide from us the deflation that is really there. We can get a proxy for what is happening with M0 by looking velocity of MB which falling like rock! Go to this link then change the "a/b" to "b/a", click the "Redraw Graph" button, so that you get GDP / MB, then you will see velocity is falling off a cliff since 2008.)

So this is why technological employment is going to be so severe and massive overcapacity in manufacturing, fixed capital infrastructure, and conspicuous consumption, because all during the 1970s, 80s, 90s, and 2000s, while a few of us hackers were becoming 100000X more productive with our new found toy (the personal computer), the bulk of the population was able to stay in the old industrial economy thanks to increasing debt.

So what you are going to see when the $150 trillion debt bomb explodes 2016ish is that anyone who is not very technically relevant in the new Knowledge Economy will find themselves unemployable. The governments will try to appease this majority by taxation and confiscating everything, because they fundamentally don't understand the cause of the problem.

With both scenarios (further concentration of wealth/obliteration of wealth) I see several problems that make this scenario seem unlikely.

Those ledger IOUs are worthless to both lender and borrower. The capital now is all in the brains of hackers such as myself. We take over now. Checkmate. While we were busy sleeping under our desks for the past 3 decades, the rest of you were out enjoying yourself. Now the payback comes. Oxford U. admits 47% of the existing jobs will be replaced with robots over next 19 years (was 20 last year when study was published).

1) The widespread confiscation of wealth would inevitably weaken or even nearly eradicate consumerism which is one of the strongest motors to our society and one of the most effective measures for the elite to concentrate wealth at the same time by concentrating the production to satisfy consumerism.  What would the elite gain by basically wiping out most people's spending capacity?

The government isn't run rationally. The vested interests want to suck as much blood out of a turnip as they can. They have no foresight on outcomes, especially they don't even understand.

However, I am one of those who do believe the Bilderbergs understand they must first collapse the economy in order to create the chaos from which they can get their one world government. They want to weaken local and national structures so they can get the economy-of-scale of control to compete with the technology which is rewarding bottom-up hackers.

It is really a defensive move for them and they while getting their world outcome are actually in retreat and losing the way ultimately.

This would in either case harm the creditor by either obliterating his own wealth or at least a lot of possibilities to spend his own wealth.
2) Do all relevant governments work on this collectively? From my current observations of international politics it seems as this is not the case most of the time. Why would it be the case in this event and wouldn't it create opportunities for backstabbing and breaking of the agreement to confiscate all wealth?

The nation-state is being destroyed by this. The national institutions will be completely discredited and untrusted within a decade.

Out of the ashes the Phoenix will rise. The world will see massive new productivity once the youth take political control away from the boomers and we move to a high tech Knowledge Age where there are no more severe national barriers. You will be able to freely travel and invest in all countries, we will be headed towards a Jetsons level of lifestyle...

3) What boundaries are set for the governments in this scenario? Are concepts like democratic elections or consistency with the constitution still applicable in this case? If not what changes and what keeps governments from doing now what you predict for 2016?

The constitutions aren't followed any more any way.

Government is reactionary. The owners of the government (the vested interests) only do what they need to maintain their position of privilege. They are preparing (e.g. the 2714 tank-like vehicles and 10 billion rounds of hollow point bullets for the Homelove Security dept in the USA, the 9/11 pretext to track everything we do, etc..) but just like in Ukraine and other places where there have been unrest, they will only act as necessary.

The peripheral economies blow up first. We see already Ukraine, Greece, Spain, Thailand, India, Indonesia, Egypt, even China has -18% drop in exports just this month over last year.

Then core of Europe 2015ish or so.

Then the USA will be last to fall 2016ish.

We are getting very close now. We might see a dead-cat bounce in 2017, and the severe SHTF hard down phase maybe 2018.

I hope you can answer some of these potential problems/questions as the theory seems pretty far-fetched in my opinion. I would rather fear a global nuclear war at the moment.

Looking forward to hearing from you.    

Well yeah that is why I've been screaming this in the Mad Max thread in the Politics forum. Check it out for more details. See also the Economic Devastation thread in the Economics forum.

There is no chance I am wrong. Zero. The only variability is in the timing. By 2020, I assure you we are in a shithole outcome.

[AnonyMint]

https://bitcointalk.org/index.php?topic=509144.msg5636651#msg5636651

Listen up please to learn some new technical information...

Got any good suggestions for trustless and low-fee mixers?  I think all the P2P mixer projects are not yet fully ready, as far as I know.

...

Tumblers like bitcoinfog provide better obfuscation, but the (huge) trade-off is that you should trust an unknown third party. I'd never risk more than 1% of my holdings to such services, but I think the service they provide is necessary and should be used, albeit with care and with just a very minor portion of ones funds at a time.

Problem is there is no way to know if a centralized service (VPN, exchange, mixer, tumbler, laundry) is hacked, under NSA gag order, dishonest, buggy, etc..

Also using the centralized (VPN, mixer, tumbler, laundry) identifies you as someone that deserves extra monitoring by the authorities.

A decentralized solution is always best, as it should look like regular transactions.

Yes, I think CoinJoin should be a very good start.  But do any really decentralised and fully working implementations of CoinJoin exist already?  I don't think so and would be interested to know if they are.

I'm not aware of any either but don't let that deter you from using one of the already existing solutions even if they aren't perfect.

A decentralized CoinJoin will have difficulty forming transactions (including unequal or equal transaction amounts) that look like this if anyone can join:

https://blockchain.info/tx/e4abb15310348edc606e597effc81697bfce4b6de7598347f17c2befd4febf3b?show_adv=true

A sharedcoin transaction will look something like this: https://blockchain.info/tx/e4abb15310348edc606e597effc81697bfce4b6de7598347f17c2befd4febf3b (picked at random). As you can see multiple inputs and outputs make the determining the actual sender and receiver more difficult.

The server does not need to keep any logs and transactions are only kept in memory for a short time. However If the server was compromised or under subpoena it could be force...

Because the way it must work is the users sign the transaction first with their requested outputs, then in the second round they sign their payments as inputs to the transaction. If the payment inputs are less than the total, then the transaction is invalid. There is no way to determine who cheated and rate limit them. Thus the saboteur can stomp on every attempt to create a CoinJoin transaction and destroy the decentralized system.

DarkCoin says they can solve this by charging a fee, but you will see I originally proposed that idea in the CoinJoin thread and the requirement is all the participants must be permanently identified and then must use divide-and-conquer to whittle down to who was the saboteur. But identification defeats the mixing!

Thus I have not yet seen a workable decentralized CoinJoin that can scale. And I don't expect one.

I posted this to the CoinJoin thread to get their technical peer-review of my statement.

Now, if the zerocoin concept would be implemented in bitcoin, it would be cool.

Just forget zerocoin even in an altcoin it won't work. Because it requires a trusted person to hold the private key that can unlock everything including taking all the zerocoins. This can't be fixed (contrary to ruminations otherwise), it is a fundamental mathematical property of the way zero knowledge proofs work when combined with an accumulator.

Also zerocoin has to be dedicated to preset transactions amounts (e.g. 1 BTC) else the anonymity set can be trivially collapsed by comparing input and output transaction amounts.

Never recommend noobs to use Tor, it's a honeypot where they are worse off than not using Tor at all.
Noobs should use a trustworthy VPN instead.
The optimal solution is VPN + Tor.

Not if you stay in-network. Unfortunately, my services (bitcoin node) are not tor-enabled yet. Namecoin has the potential to facilitate this with human-readable addresses as well.

Not true. Tor is always subject to timing analysis by an entity such as the NSA (which is recording ans storing nearly all global encrypted traffic in Utah) which can see the encrypted packets running between Tor nodes.

Popular VPNs are also very likely all honeypots and unpopular ones give only a small anonymity set.

Currently the only known way to be reliably anonymous is use a connection to the internet that can't be traced to you, e.g. netcafe without cameras any where and don't drive your car as that has secret tracking built-in according to CEO of Ford, a throw-away mobile device and simm that doesn't have your id registered and used for no other activity, etc.

Anonymint: we are not discussing being safe against a global adversary such as the NSA, we all know that mixers + Tor is probably not enough to defeat them because of honeypots, timing attacks, deep packet inspection, etc...

We are discussing using basic security procedures in order not to be "the low hanging fruit" and thus being reasonably safe against the casual hacker/criminal doing trivial blockchain and network analysis to easily link identities to BTC balances. For that purpose running your wallet through Tor and using a decentralized and trustless mixer such as coinjoin should be enough.

The government and the criminals are sometimes one in the same.

But (uninformed) trust is all that is holding up the $150 trillion in fractional reserves, so you won't find too many people that subscribe to my view (yet). They will learn by 2020.

And you did not address my technical point about CoinJoin, which has nothing to do with the NSA.

In short, we are pretty well f8cked approaching the 2016ish global conflagrapocalpyse.


Adam Back (the creator of Hashcash which Bitcoin is based on) explains the anonymity problem (jump to 24:25 mins into the video).

[tkbx]

How are there so many "no"s? Did I not understand the question?

If someone doesn't invest in Bitcoin because they don't understand it, they'll be missing out.
If someone does invest in Bitcoin when they don't understand it, unless they've got an honest friend to help them securely set up an encrypted paper wallet, they'll likely have their coins stolen.

[AnonyMint]

At the end of my prior post, there is a link to an insightful Adam Back presentation. Skip also to the 113:00 min point in the video to hear him describe how potentially Ethereum could be infected with a virus!

[AnonyMint]

F8ck the coming apocalypse is worse than I previously estimated...

Soooooooooo, I read today that the world's debt amount to $100 trillion.
Wikipedia says that in 2012, the GDP was ~72 trillion. Let's suppose that it's $80 trillion now.

Debt to GDP = 125%

Incorrect. Total debt is $157 trillion in developed countries plus $66 trillion in emerging markets, because is 313% of GDP and the GDP is $72 trillion:

http://www.gfmag.com/tools/global-database/economic-data/11855-total-debt-to-gdp.html#axzz2iu5C4Y4Z

http://blogs.wsj.com/economics/2013/05/11/number-of-the-week-total-world-debt-load-at-313-of-gdp/

Chinese corporate debt is the highest in the world as a percentage of GDP:

https://bitcointalk.org/index.php?topic=365141.msg4337574#msg4337574

Don't forget to add on $1000 trillion of sovereign bond derivatives, and $1000 trillion of unfunded social liabilities.

http://www.indexq.org/economy/gdp.php

[rpietila]

Operating the NSA requires quite bright people. Don't you think they will be increasingly hard to find when the U.S. descends towards being the Animal Farm?

My thinking goes like this: what people want the most is freedom, and working for a totalitarian state is the antithesis of freedom. Probably some will still choose to do it, but the brightest have the most choice and are the least likely to choose working for the govt.

[MoonShadow]

Operating the NSA requires quite bright people. Don't you think they will be increasingly hard to find when the U.S. descends towards being the Animal Farm?

My thinking goes like this: what people want the most is freedom, and working for a totalitarian state is the antithesis of freedom. Probably some will still choose to do it, but the brightest have the most choice and are the least likely to choose working for the govt.

While I agree that most of the brightest wouldn't work for the government as long as they can find income elsewhere, that's already the case.  Those that are ideologically opposed to government leave those services fairly quickly under any economic conditions.  However, there are always the remainder.  I've read that roughly 3% of the adult population are sociopathic to some degree or another.  Having worked in government 'enforcement' in the past, my own experiences tell me that government is significantly overrepresented by this demographic.  If you have ever really known a true sociopath, they are not motivated by economic gain so much as by personal power gain.  A society in decline would give many of them an increased opprotunity for power gains in the near term.  I just can't picture these people walking away from government 'service', and (unfortunately) almost all of them are quite intelligent.  Do not underestimate your enemy, and trust me when I say that they are, indeed, your enemy.

[rpietila]

[sociopaths] I just can't picture these people walking away from government 'service', and (unfortunately) almost all of them are quite intelligent.  Do not underestimate your enemy, and trust me when I say that they are, indeed, your enemy.

Perhaps this is why Third Reich was perfectly operational until destroyed militarily. Who is there to destroy this one? Or should we start to accelerate our prayers concerning Jesus' coming? 

[MoonShadow]

F8ck the coming apocalypse is worse than I previously estimated...

Soooooooooo, I read today that the world's debt amount to $100 trillion.
Wikipedia says that in 2012, the GDP was ~72 trillion. Let's suppose that it's $80 trillion now.

Debt to GDP = 125%

Incorrect. Total debt is $157 trillion in developed countries plus $66 trillion in emerging markets, because is 313% of GDP and the GDP is $72 trillion:

http://www.gfmag.com/tools/global-database/economic-data/11855-total-debt-to-gdp.html#axzz2iu5C4Y4Z

http://blogs.wsj.com/economics/2013/05/11/number-of-the-week-total-world-debt-load-at-313-of-gdp/

Chinese corporate debt is the highest in the world as a percentage of GDP:

https://bitcointalk.org/index.php?topic=365141.msg4337574#msg4337574

Don't forget to add on $1000 trillion of sovereign bond derivatives, and $1000 trillion of unfunded social liabilities.

http://www.indexq.org/economy/gdp.php

While that is likely a fairly accurate statistic, it's still very misleading.  There is a fable that is told (sometimes) to economics students to illistrate the nature of debt like this.  Here is one version of it I quickly found with google...

It is the month of August; a resort town sits next to the shores of a lake. It is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town. He enters the only hotel, lays a 100 dollar bill on the reception counter, and goes to inspect the rooms upstairs in order to pick one.

The hotel proprietor takes the 100 dollar bill and runs to pay his debt to the butcher. The Butcher takes the 100 dollar bill and runs to pay his debt to the pig raiser. The pig raiser takes the 100 dollar bill and runs to pay his debt to the supplier of his feed and fuel. The supplier of feed and fuel takes the 100 dollar bill and runs to pay his debt to the town’s prostitute that, in these hard times, gave her “services” on credit. The hooker runs to the hotel, and pays off her debt with the 100 dollar bill to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 dollar bill back on the counter so that the rich tourist will not suspect anything. At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 dollar bill, after saying he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism.


Most of these derivitives are just like the debt that this small town had, interlinking trade debt that largely self cancels.  (Insert plug for Ripple here, if you like)  What the real fear is that, should one of the major players here, say the hooker, was also indebted to the tune of $100 to her drug dealer.  This whole story coudl come crashing down if the rich tourist didn't get his $100 bill back.  However, not all of it would come crashing down; some portion of the debt is real enough and back by real assets.  No matter how much of the derivitives can actually be paid, the assets are real.

EDIT::  Notice that in the story, the total indebtedness of the town was about $400

[MoonShadow]

Wow, you have sunk to the level of posting shadowstats to help back your claims? Come on man.

Shadowstats is probably the most trustworthy source of information available in the United States today.  Basicly, their metrics are the most similar to those used prior to WW2, so they would be the best to compare to the official statistics for the Great Depresssion, as an example.  The data that comes out of official US government channels are only slightly more trustworthy than those that come out of official Chinese channels, or official Cuban channels.  It is unwise to trust the word of the institution that is most likely to benefit from an unrealisticly positive image.