How and When Fiat Will End

[Sword Smith]

Intro
Reasonable economists like Peter Schiff and many others have for a long time foreseen a currency collapse in the USD and other currencies but they have not been succesful at predicting a timing for this possible future event. I now believe that I know how and when this will materialize and I wish to present my case in this thread. There are some formulas in this thread. If you are not comfortable with them, just skip them. The main point that they make is that bitcoin rises in price when more goods are being traded in bitcoins.

Monetary Theory
The classical velocity equation for money states that the value of a currency is given by

PQ = MV, where P is inversely proportional to the value of a currency -- the price level. Q is the value of goods being traded in that currency within a given amount of time, M is the number of currency units. V is the average velocity for the currency, i.e., how many times it changes hands within the same time interval that defines Q.

In another thread here I show that the value of any currency can be expressed as val=Q/(M*V). This means that the market cap of a currency is val*M = Q/V.

Hyperinflation of USD and State Currencies
The long-term trend of a rising bitcoin value is due to an increased amount of goods and services being traded in bitcoins. But this also have an inverse impact on the dollar. When goods are traded in bitcoins, they are no longer traded in dollars and this reduces the demand for dollars which lowers the price. This effect has not yet been felt for the dollar since bitcoin is still such a small currency (market caps is thousands of times less than USD). But if, and I am quite certain it will, bitcoin continues to experience more good and services being traded then this is just a matter of time.

This leads me to my first conclusion: Bitcoin will be the catalyst for the collapse of the USD. I should add that the world will be better for it although it will be a heavy storm which will destroy the savings of many and might have adverse political consequences. See this thread for more on that: Bitcoin's Dystopian Future, by dacoinminster


When will this occur?
The second question is timing: When will bitcoin hyperinflate the world's fiat currencies?

My thesis is that this will occur when bitcoin's market cap becomes so large that people will start to see the dollar fall because of it and the debasement of the dollar exceeds that of regular price level rises which is around 2 % (some claim that it is higher, though). But since Bitcoins rise in value is exponential, the exact ratio at which this will happen is less important. Here, I simply assume that fiat will hyperinflate when bitcoin reaches a market cap of between 1 and 10 % of all the world's fiat currencies. I use the Forum user rpietila's economic analysis presented here to support the claim of exponential rise and to calculate future values of bitcoin.

It is easier to know M in bitcoin than it is in USD but I will use the M2 supplied by the Federal Reserve which is 11215bn USD or 11.2tr USD. If someone has a better measure, I am happy to fix this later. The US share of world GDP is 22.3 according to the UN (source).

So assuming that the rest of the world has a monetary system comparable to that of the US, I estimate that the world M2 converted into USD is 11.2tr USD/0.223 = 50.20tr USD. Remember that it is mainly the order of magnitude that I am trying to calculate here. The exact numbers are interesting but irrelevant for the core of my argument.

So I predict that my scenario will happen when (or if) bitcoin reaches a market cap of between 500bn USD and 5'000 USD which is approximately 67 to 667 times the current value. According to the forum user rpietila's calculations, the Bitcoin price ten doubles every 325 days (see the formula in the top link in his thread that I linked to above. This means that Bitcoin will increase in value by a factor of 67 within 518 days which is Friday, 30 October 2015. Bitcoin will increase by a factor of 667 times within 844 days which is Tuesday, 20 September 2016.

Conclusion
I therefore predict
(1): Bitcoin will catalyse the collapse of world fiat currencies.
(2): Fiat currencies will hyperinflate when Bitcoin reaches a market cap of between 500bn USD and 5'000bn USD. This means a price between 30'000 USD and 300'000 USD per bitcoin.
(3): This will probably occur at some point between October 2015 and September 2016.

I think (1) and (2) are fairly certain but of course many unexpected things can happen. (3) is entirely dependent on the rate of the exponential rise and whether bitcoins rise in value i exponential at all. I believe it is but the timing might be adjusted as the exponential rates change.

[cryptos]

Sounds pretty accurate and I think all intentional...Need an enemy to blame and BTC will be it.

[Sword Smith]

Sounds pretty accurate and I think all intentional...Need an enemy to blame and BTC will be it.

You are probably right that bitcoin will be blamed when many people's savings are wiped out. That worries me as well. But what do you mean by "intentional"?

[cryptos]

Need excuse to end debt based fiat currency monetary system.  BTC designed to do exactly that.  

Intent is to end existing and bring in new.  Made abundantly clear by insider shill Jim Rickards in his latest book and tour.
Just have to listen to a lot of his interviews.  He is a proven shill for banker and insider establishment.  
http://www.hangthebankers.com/establishment-shill-jim-rickards-covers-for-the-bankers-911-insider-trading-crimes/

Basically means that when he speaks is speaking for establishment.

Also recent actions of US gov for example "Operation Choke Point”

Banks to payday lenders: Quit the business or we’ll close your account.
http://www.washingtonpost.com/business/economy/banks-to-payday-lenders-quit-the-business-or-well-close-your-account/2014/04/11/afd34976-c0c6-11e3-bcec-b71ee10e9bc3_story.html

Could go on and on.  BTC is weapon that Jim Rickards warns about and calls "financial cyber terrorism"
However, in my view this is a ploy and distraction.  It is intentional to have a non-entity to blame.  

edit: He also says will be left with basket of crypto-currencies and I have no idea how long this will all take

All the pieces fit.  I do not think however, that BTC will survive, it will be crushed.  It is trojan horse to bring in real intent which is not clear to me as yet.  But blockchain asset tracking and forfeiture technology is here to stay.  That is true intent, that and negative interest rates, switching to a consumption tax, everything about blockchain is a governments dream world with NSA to monitor it.

"This means a price between 30'000 USD and 300'000 USD per bitcoin.
(3): This will probably occur at some point between October 2015 and September 2016."

Read your post too fast...this i do not think is accurate, rpietila is overly optimistic and extremely btc wealthy so take anything he says with a bucket of salt.  I think may get to 10k per btc in 2016, for end of 2014 and 2015 I have no idea nor do I care.  BTC is being constantly diluted and inflated via alt coins.  

[Ron~Popeil]

Need excuse to end debt based fiat currency monetary system.  BTC designed to do exactly that.  

Intent is to end existing and bring in new.  Made abundantly clear by insider shill Jim Rickards in his latest book and tour.
Just have to listen to a lot of his interviews.  He is a proven shill for banker and insider establishment.  
http://www.hangthebankers.com/establishment-shill-jim-rickards-covers-for-the-bankers-911-insider-trading-crimes/

Basically means that when he speaks is speaking for establishment.

Also recent actions of US gov for example "Operation Choke Point”

Banks to payday lenders: Quit the business or we’ll close your account.
http://www.washingtonpost.com/business/economy/banks-to-payday-lenders-quit-the-business-or-well-close-your-account/2014/04/11/afd34976-c0c6-11e3-bcec-b71ee10e9bc3_story.html

Could go on and on.  BTC is weapon that Jim Rickards warns about and calls "financial cyber terrorism"
However, in my view this is a ploy and distraction.  It is intentional to have a non-entity to blame.  

edit: He also says will be left with basket of crypto-currencies and I have no idea how long this will all take

All the pieces fit.  I do not think however, that BTC will survive, it will be crushed.  It is trojan horse to bring in real intent which is not clear to me as yet.  But blockchain asset tracking and forfeiture technology is here to stay.  That is true intent, that and negative interest rates, switching to a consumption tax, everything about blockchain is a governments dream world with NSA to monitor it.

"This means a price between 30'000 USD and 300'000 USD per bitcoin.
(3): This will probably occur at some point between October 2015 and September 2016."

Read your post too fast...this i do not think is accurate, rpietila is overly optimistic and extremely btc wealthy so take anything he says with a bucket of salt.  I think may get to 10k per btc in 2016, for end of 2014 and 2015 I have no idea nor do I care.  BTC is being constantly diluted and inflated via alt coins.  

How exactly will they "crush" bit coin? The genie is all ready out of the bottle. One country might make it really difficult to use it but there is no way to eradicate it.

[EricTyle]

What I don't understand is why we are valuing, in 2016 if BTC crushes USD or world currency in general, BTC at the dollar value. At that point BTC would be valued at BTC, where 1 BTC = 1 BTC.

Also keeping this in mind, if BTC becomes the world's currency would the market cap not be 241tr (or closer to this than the latter) instead of 50tr? At that point, BTC would be (300k*241/50) roughly 1.446$m/BTC by your calculations. No?

[TheTruth4]

I learn more from your posts then I did in my college economics class 

[spazzdla]

Sounds pretty accurate and I think all intentional...Need an enemy to blame and BTC will be it.

You are probably right that bitcoin will be blamed when many people's savings are wiped out. That worries me as well. But what do you mean by "intentional"?

Probably ment planned the banksters so they can implyment a gobal currency and have complete control over it.  IMO they will try the pitch look what the gov did with your monetary system you need us to handle it..  People are really stupid and won't figure out they have been handling it since 1913.  Most people still think money is backed by gold..  it's quite pathetic.

[Benjig]

What I don't understand is why we are valuing, in 2016 if BTC crushes USD or world currency in general, BTC at the dollar value. At that point BTC would be valued at BTC, where 1 BTC = 1 BTC.

Also keeping this in mind, if BTC becomes the world's currency would the market cap not be 241tr (or closer to this than the latter) instead of 50tr? At that point, BTC would be (300k*241/50) roughly 1.446$m/BTC by your calculations. No?

This can be true at some point of the global economy, fiat is going to an end, there will be the time when it just plummets with so much debt and btc will be one of the mediums to save money.

[pening]

The end of fiat?  Bitcoin will cause this?  I always find this type thread and the views expressed quite funny, because Bitcoin is fiat money.  Its not based on real reserves or intrinsic physical commodity, its value is derived from confidence in law (albeit maths) and supply/demand.  That fits the definition of fiat money.

[Benjig]

The end of fiat?  Bitcoin will cause this?  I always find this type thread and the views expressed quite funny, because Bitcoin is fiat money.  Its not based on real reserves or intrinsic physical commodity, its value is derived from confidence in law (albeit maths) and supply/demand.  That fits the definition of fiat money.

This is not true, fiat can be produced without limit, bitcoins has limit.

A paper currency system contains the seeds of its own destruction. The temptation for the monopolist money producer to increase the money supply is almost irresistible. In such a system with a constantly increasing money supply and, as a consequence, constantly increasing prices, it does not make much sense to save in cash to purchase assets later. A better strategy, given this senario, is to go into debt to purchase assets and pay back the debts later with a devalued currency. Moreover, it makes sense to purchase assets that can later be pledged as collateral to obtain further bank loans. A paper money system leads to excessive debt.

[pening]

The end of fiat?  Bitcoin will cause this?  I always find this type thread and the views expressed quite funny, because Bitcoin is fiat money.  Its not based on real reserves or intrinsic physical commodity, its value is derived from confidence in law (albeit maths) and supply/demand.  That fits the definition of fiat money.

This is not true, fiat can be produced without limit, bitcoins has limit.

Firstly, that is not a key defining attribute of fiat money, and secondly Bitcoin only has a limit artificially imposed by those that regulate it.  Exactly as any national fiat currency is limited by the government/laws/regulation (which is the essence of fiat money).  At some point in the future, however unlikely it may seem today, Bitcoin base may be extended.   Need a new word or term.

[waldox]

fiat will end when it hyper inflates and people are forced to use alternatives like ammo, gas, gold, silver, bread, or bitcoin

[zimmah]

BTC is being constantly diluted and inflated via alt coins.  

the same way copper dilutes and inflate gold

The end of fiat?  Bitcoin will cause this?  I always find this type thread and the views expressed quite funny, because Bitcoin is fiat money.  Its not based on real reserves or intrinsic physical commodity, its value is derived from confidence in law (albeit maths) and supply/demand.  That fits the definition of fiat money.

This is not true, fiat can be produced without limit, bitcoins has limit.

Firstly, that is not a key defining attribute of fiat money, and secondly Bitcoin only has a limit artificially imposed by those that regulate it.  Exactly as any national fiat currency is limited by the government/laws/regulation (which is the essence of fiat money).  At some point in the future, however unlikely it may seem today, Bitcoin base may be extended.   Need a new word or term.

not without a majority vote, which will never happen

[Ron~Popeil]

The end of fiat?  Bitcoin will cause this?  I always find this type thread and the views expressed quite funny, because Bitcoin is fiat money.  Its not based on real reserves or intrinsic physical commodity, its value is derived from confidence in law (albeit maths) and supply/demand.  That fits the definition of fiat money.

This is not true, fiat can be produced without limit, bitcoins has limit.

A paper currency system contains the seeds of its own destruction. The temptation for the monopolist money producer to increase the money supply is almost irresistible. In such a system with a constantly increasing money supply and, as a consequence, constantly increasing prices, it does not make much sense to save in cash to purchase assets later. A better strategy, given this senario, is to go into debt to purchase assets and pay back the debts later with a devalued currency. Moreover, it makes sense to purchase assets that can later be pledged as collateral to obtain further bank loans. A paper money system leads to excessive debt.

Exactly. You cannot trust people to regulate it.

[Slingshot]

To clarify things:

https://en.wikipedia.org/wiki/Fiat_currency

  "Fiat money is money which derives its value from government regulation or law. It differs from commodity money, which is based on a good, often a precious metal such gold or silver, which has uses other than as a medium of exchange. The term derives from the Latin fiat ("let it be done", "it shall be").[1]

The first use of fiat money has been recorded in China around 1000 CE. Since then, it has been used intermittently by various countries, concurrently with commodity currencies."

and

 "Fiat money has been defined variously as:

    Any money declared by a government to be legal tender.[2]
    State-issued money which is neither convertible by law to any other thing, nor fixed in value in terms of any objective standard.[3]
    Intrinsically valueless money used as money because of government decree.[4]

While gold- or silver-backed representative money entails the legal requirement that the bank of issue redeem it in fixed weights of gold or silver, fiat money's value is unrelated to the value of any physical quantity. Even a coin containing valuable metal may be considered fiat currency if its face value is defined by law as different from its market value as metal.[5]"


My 0.0000 0002 Dorian's:
================
 In any estimation these are good definitions of fiat and the meaning of the Latin term fiat ("let it be done", "it shall be").

 Although Bitcoin has some of the qualities as fiat it isn't the adopted currency of any government today. Sure it may become that some day, but not likely any time in the foreseeable future. I will let another reply of mine touch on that thought.

 Bitcoin isn't exactly fiat in the sense any of us ever thought of fiat before. Bitcoin re-defines what money can be. It crossed borders of what is money and what is a commodity.

Bitcoin is Freedom.
 

[cryptos]

How exactly will they "crush" bit coin? The genie is all ready out of the bottle. One country might make it really difficult to use it but there is no way to eradicate it.

I think BTC is a bait and switch.  Get everyone into "e-money" as Milton Friedman called it in 1999 and at some point, possibly,
Satoshi will release his coins to flood the market or will be done some other way.  Perhaps "BTC enables terrorism and child porn" so
use our new coin, I don't know how this will be done.  However I do not think TPTB will let mircea popescu become a trillionaire.

So at some point they will take control and drive this in exactly the direction they intended all along.  Andreas
has spoken about this also.  Everyone will have to make a choice, their way or go own way ie DRK, XC, MRO or whatever, which will
likely be illegal to use or accepted for goods and services by that point IMO.  

BTC is fiat and this as been argued well by Anonymint in his thread: Coinbase + Bitpay is enough to make Bitcoin a fiat
https://bitcointalk.org/index.php?topic=557732.0

There may be a limit of 21million BTC today, but with all these interchangeable alt coins, some of which you can
exchange directly with USD like LTC, Doge, PPC, NMC and FTC , there really is no limit to number of coins.  It is an ever
inflating pool that dilutes BTC and USD constantly as flows into these other alt coins.  

"the same way copper dilutes and inflate gold"
You can exchange your gold for copper or use your copper to exchange for gold. As opposed to only being able to use or possess gold so yes exactly.

There is very interesting paper from Kenneth Rogoff recently, described here:
"Rogoff Examines the Upsides of a Currency-Free Economy"
http://blogs.wsj.com/economics/2014/05/21/rogoff-examines-the-upsides-of-a-currency-free-econom/

Unfortunately the pdf is no longer free to download.  The timing of this is very curious and given who wrote it, worth paying
attention to. He is essentially arguing for "a more proactive strategy for phasing out the use of paper currency."
Discussed here: https://bitcointalk.org/index.php?topic=630538.0 and here https://bitcointalk.org/index.php?topic=619865.0

"DeathandTaxes" writes: "A digital currency known as the dollar already is the norm" the USD is still debt based and does not have
the blockchain.  

Bitcoin is Freedom.

Bitcoin is definitely not freedom.  The existing blockchain is another form of slavery, an open asset tracking and forfeiture tool, the true goal.  Marc Andreessen said just last month that within two years libertarians are going to hate bitcoin...once they realize what it really is.

States need to replace debt based fiat system with something else and blockchain the most visible and viable candidate.
By 2030 half of the population will be unemployed due to automation.  Runaway medical costs, long term debt and liabilities of 200 trillion according to Laurence Kotlikoff http://usawatchdog.com/america-in-worse-fiscal-shape-than-detroit-professor-laurence-kotlikoff/, trillions of derivatives, the list goes on and on.

It is pretty clear in my mind where this is all going and why.

This whole process could take until 2030~2040, so existing fiat debt based currency and monetary system not going anywhere any time soon...though Jim Rickards recently said this could all happen faster than any of us think...

[Trading]

Per definition, as a standard of value, bitcoin will always have to be measured taking in account the goods it can buy.

If fiat ever ends in a hyper-inflation, we would measure the value of bitcoin in gold, oil and all other things we could buy with bitcoin: more or less, everything, in a situation like that.

But those timing predictions are just numbers tossed out.

[cryptos]

Absolutely correct and succinctly stated.

However I am not convinced about the hyper-inflation argument, rather I think fiat will hyper deflate relative to BTC and
perhaps a few other alt coins.  This is what will drive the masses in crypto-currencies and the blockchain voluntarily. 

It is brilliant social engineering mechanism, greed and fear, push and pull.  I think, speculating, that it is possible that
BTC is the enginnering tool intended to make people lose confidence in the USD.  This will be done by driving BTC to
10k or over next couple of years, ie sometime in 2016.  That is why, IMO, the USDA is buying submachine guns
http://reason.com/blog/2014/05/16/why-the-hell-is-the-department-of-agricu as well as the fed arming
every single agency to the teeth and DHS buying millions of rounds of hollow point bullets etc.

[Slingshot]

Re: How and When Fiat Will End
====================

Short version:
----------------

Sadly it wont end until fiat is ruined again, and again at the very least. And not for at least several decades from today if things continue as they are presently. So 20 to 80 years from today is the answer. Best guess 55 years. But governments wont surrender to them without trying to keep competing with their own fiat issues. Much less they need time to work out fiat-currency-debt restructuring and forgiveness.

 In short: Debt-Free Decentralized Monetary cryptocurrencies and what they offer future generations over the longest terms are nothing short of revolutionary on a scale never before seen in mankind's history.

 This Decentralized Cryptocurrency Revolution is far bigger than the entire Internet. It's bigger than modern electricity in what it will do for every person's prosperity on this earth over their life span's going forward, especially the younger generations alive today. It's that huge, that sustaining, that far reaching. That ever lasting.

 Decentralization wont be confined to merely monetary issues. Instead a general decentralization of many things will ensue going forward. That will greatly defuse far too much centralized command and control and make the world much better off in return.

 Centuries from now, with all those gains compounded and thus added together people will be able to look back and see in wonderment how far they arrived at that point in time in the distant future, where ever in the universe they are, if only they never forget their own ancestors history and their many mistakes.

 Debt-based-fiat currency is evil. It must be outlawed forever as soon as governments finally understand this. Why? This year the USA alone will spend half a Trillion dollars on just their interest payments and that's at record, all time low interest rates.

 So when I say how huge the improvement over debt-based-fiat any debt-free currency is I am not in the least big exaggerating. It's all an enormous improvement.

 Then toss in Decentralization of Secure Cryptocurrency and suddenly the corruptions and temptations of too much centralized command and control is fully neutralized and held permanently in check if brought forward and maintained properly. All thanks to the real 'best & brightest'.

 Lastly add in generalized decentralization of many other things that lean themselves much better off with decentralization rather than with too much centralized command and control and then suddenly we have a much better new world to hand off to the future.

 There is no better gift than that for future generations. This gives them all the tools they need to build much better lives than we all ever had going back several decades from today. The world is a mess today, but soon it will get much better one way or another.

 The future is going to be awe inspiring in 35 to 70 years and most of those under 40 years of age today will still be alive to enjoy it.


Bitcoin is Pure Genius.

Bitcoin is Monetary Freedom.