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Author Topic: Gold collapsing. Bitcoin UP.  (Read 1921702 times)
sidhujag
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February 03, 2015, 10:21:10 PM
 #21001

http://news.goldseek.com/GoldSeek/1422975660.php

Why inflation is just smoke & mirrors... he pretty much sums up what bitcoin is all about with its finite supply but fails to correlate the two.

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brg444
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Bitcoin replaces central, not commercial, banks


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February 03, 2015, 10:58:55 PM
 #21002

Apparently Blockstream is 1-2 months away from releasing code for federated sidechains... Interested to see what comes out of this

"I believe this will be the ultimate fate of Bitcoin, to be the "high-powered money" that serves as a reserve currency for banks that issue their own digital cash." Hal Finney, Dec. 2010
rocks
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February 03, 2015, 11:10:08 PM
 #21003

http://news.goldseek.com/GoldSeek/1422975660.php

Why inflation is just smoke & mirrors... he pretty much sums up what bitcoin is all about with its finite supply but fails to correlate the two.

Great read, thanks.

The problem for gold bugs is they are stuck on looking at the Store-of-Value function and history of gold only. They do not see that despite a superior SoV function gold failed because it's Payment-Function is weaker than central bank fiat money, and that the Payment-Function drives adoption, not the SoV function. Example: this article focuses on the SoV function only.

The key central bank invention was to transition money to a ledger account, which enabled instant transfers between accounts regardless of geographical location. Essentially fiat money could move as fast as information, this is light-years ahead of gold. The public accepted fiat because it is easier to work with, despite it's poor SoV function because the public didn't emphasize the SoV function. This lack of public SoV focus is largely why governments have gotten away with their abuse of money IMHO.

Yes Bitcoin provides a superior SoV function, but it has a superior Payment-Function to fiat and that is what will slowly win over individuals. Essentially Bitcoin provides all the benefits of fiat ledger money with the benefits of direct control/interaction (no middlemen), this combined with personal computing creates a vastly superior Payment-Function, which is what will drive adoption.

Bitcoin's perfect SoV I don't see as being the sole driver of wider adoption, even though it's SoV is why I support the project. That is why it is critical to protect Bitcoin's SoV function from the inevitable attacks we'll see.
rocks
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February 03, 2015, 11:21:37 PM
 #21004

Pre-Central bank vs. post-Central bank inflation. They get away with this because most of the public does not care about the SoV function. I remember seeing an inflation chart for Rome a while ago, and it looked very similar with the last 100 inflationary years lining up with 200-300 AD Rome. We know how that turned out.

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February 04, 2015, 01:42:33 AM
 #21005

http://news.goldseek.com/GoldSeek/1422975660.php

Why inflation is just smoke & mirrors... he pretty much sums up what bitcoin is all about with its finite supply but fails to correlate the two.

Great read, thanks.

The problem for gold bugs is they are stuck on looking at the Store-of-Value function and history of gold only. They do not see that despite a superior SoV function gold failed because it's Payment-Function is weaker than central bank fiat money, and that the Payment-Function drives adoption, not the SoV function. Example: this article focuses on the SoV function only.

The key central bank invention was to transition money to a ledger account, which enabled instant transfers between accounts regardless of geographical location. Essentially fiat money could move as fast as information, this is light-years ahead of gold. The public accepted fiat because it is easier to work with, despite it's poor SoV function because the public didn't emphasize the SoV function. This lack of public SoV focus is largely why governments have gotten away with their abuse of money IMHO.

Yes Bitcoin provides a superior SoV function, but it has a superior Payment-Function to fiat and that is what will slowly win over individuals. Essentially Bitcoin provides all the benefits of fiat ledger money with the benefits of direct control/interaction (no middlemen), this combined with personal computing creates a vastly superior Payment-Function, which is what will drive adoption.

Bitcoin's perfect SoV I don't see as being the sole driver of wider adoption, even though it's SoV is why I support the project. That is why it is critical to protect Bitcoin's SoV function from the inevitable attacks we'll see.

Nice post, rocks.

Run Bitcoin Unlimited (www.bitcoinunlimited.info)
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February 04, 2015, 02:05:48 AM
 #21006

The key central bank invention was to transition money to a ledger account, which enabled instant transfers between accounts regardless of geographical location. Essentially fiat money could move as fast as information, this is light-years ahead of gold.

One has nothing to do with the other. You can use a ledger that's backed by units of gold, or a ledger that's backed by nothing and can be inflated on a whim. Sure you have to do audits to make sure a gold ledger isn't being inflated, but it can be done.
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February 04, 2015, 02:12:12 AM
 #21007

The key central bank invention was to transition money to a ledger account, which enabled instant transfers between accounts regardless of geographical location. Essentially fiat money could move as fast as information, this is light-years ahead of gold.

One has nothing to do with the other. You can use a ledger that's backed by units of gold, or a ledger that's backed by nothing and can be inflated on a whim. Sure you have to do audits to make sure a gold ledger isn't being inflated, but it can be done.

but from a practical standpoint, it's never been done.

just look at the largest supposed holder of gold; the Fed.  totally opaque.
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February 04, 2015, 03:49:46 AM
 #21008

Sure you have to do audits to make sure a gold ledger isn't being inflated, but it can be done.

No it can't.  That model has failed every single time it has been tried.  The dollar was once backed by gold.  That peg failed.  Egold was once backed by gold.  That also failed.  If you look through history, there are countless other failures of gold-backed currencies.  The reason:  a central point of failure.  Bitcoin is the only reasonable solution.  To attempt another centralized gold backed currency would be insane.


Counterfeit:  made in imitation of something else with intent to deceive:  merriam-webster
Harmonica
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February 04, 2015, 04:46:03 AM
 #21009

Sure you have to do audits to make sure a gold ledger isn't being inflated, but it can be done.

No it can't.  That model has failed every single time it has been tried.  The dollar was once backed by gold.  That peg failed.  Egold was once backed by gold.  That also failed.  If you look through history, there are countless other failures of gold-backed currencies.  The reason:  a central point of failure.  Bitcoin is the only reasonable solution.  To attempt another centralized gold backed currency would be insane.



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February 04, 2015, 04:53:57 AM
 #21010

The key central bank invention was to transition money to a ledger account, which enabled instant transfers between accounts regardless of geographical location. Essentially fiat money could move as fast as information, this is light-years ahead of gold.

One has nothing to do with the other. You can use a ledger that's backed by units of gold, or a ledger that's backed by nothing and can be inflated on a whim. Sure you have to do audits to make sure a gold ledger isn't being inflated, but it can be done.

I can see why you could think gold back paper is the same as fiat money, but here is why I think that is incorrect.

In a gold backed paper system, gold is the reserve base asset. Yes entities can issue paper or a ledger backed by gold but: 1) you have to trust those entities to be honest (and history has shown that many over leveraged and failed) and 2) you can only use paper or ledger transfer within that single issuer's system.

For example, if two people used the same regional bank that issued a gold backed ledger, they could transfer paper gold between each other using similar transfer mechanisms as fiat. However if those two people used different regional banks that issued separate gold backed ledgers, transfers between them would require the banks to physically transfer gold between them (or they probably would not transact directly and require a gold withdraw from one and gold deposit to the other). Similarly if two nations issued gold backed currencies, trade between them would finally have to be settled in gold. BTW, this is how the US slowly acquired it's gold horde in the 1800s starting from nothing, it traded services and slowly acquired physical metal, this happened despite most countries having paper currencies for end-user convenience.

For example when France and Spain traded, even if both countries issued paper currencies backed by gold, they would settle in physical gold eventually.

The key is gold is still the backing asset, and transfers between issuers of gold backed paper would still have to settle in physical metal. (This is where the phrase "cold hard cash" comes from, paper is neither cold nor hard.) Additionally if a backer issued more promises then held gold, that backer would eventually go bust because it would require a bailout by mother nature to magically issue more gold.

In a fiat system, a fiat currency or debt is the reserve base asset. This reserve asset exists as a man-made ledger item only (just like Bitcoin BTW). In today's global US dollar system, US debt functions as the reserve base asset.

Here transfers between different regional banks or even different countries is done 100% in a ledger form. Since US debt is the backing asset, and US debt exists in ledger form with the US treasury, transfers can be done between any two entities by the US Treasury, nothing physical needs to move.

For the same example, today when France and Spain trade, they settle in transfers of US debt, which are ledger transfers on at the US Treasury listing only.

The two systems may look the same from an end-user perspective (us plebs), but the mechanisms, trust and guarantees of the two systems are vastly different.
rocks
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February 04, 2015, 06:22:02 AM
 #21011

The key central bank invention was to transition money to a ledger account, which enabled instant transfers between accounts regardless of geographical location. Essentially fiat money could move as fast as information, this is light-years ahead of gold.

One has nothing to do with the other. You can use a ledger that's backed by units of gold, or a ledger that's backed by nothing and can be inflated on a whim. Sure you have to do audits to make sure a gold ledger isn't being inflated, but it can be done.

but from a practical standpoint, it's never been done.

just look at the largest supposed holder of gold; the Fed.  totally opaque.

Fully agree. Though to be fair, my understanding is backing did work somewhat OK in the US in the 1800s when banking was very fragmented.

My understanding is back then banking in the US was very fragmented, especially compared to Europe. Banks were largely small and regional and many issued their own paper notes backed by gold. The US also did not have a central bank to bailout banks or downturns.

The result was no bank was so large that it's failure mattered to anyone except their depositors/investors, to big to fail was not a concept yet. This also meant that if banks levered themselves slightly (meaning more notes than backing assets), they were exposed to a deposit run. To protect against this banks mostly kept leverage well below 2x. Yes, there was the occasional run and bank failure, but it would happen on an individual bank basis, and was not system wide.

Depositors (i.e. the market) were responsible to ensure bank honesty and most banks remained honest out of self preservation interest. If a bank acted even slightly irresponsibly (or was rumored to), it wouldn't take long for a depositor queue to form to drain reserves.

The key was the system was decentralized and fragmented, and so could withstand individual failures. This system worked for a time, and it was the most rapid growth in US history and when the US surpassed England as the largest economy.

When I've read the reasons behind why those who created the FED did so, they wanted to strengthen the system against two things. 1) They wanted protect depositors against failures and 2) they wanted to enable the government to have the ability to fund itself through downturns (previously during a regular recessions, the US government would need to turn to the JP Morgan's of the country for funding, they wanted to stop this).  

The problem is they didn't understand two things: 1) they eliminated market pressures from the system by making depositors not responsible for their loses and 2) they eliminated the decentralized nature of the system by structuring everything under one dominant entity (the FED).

Then in the 1920s two things then happened: 1) Leverage exploded in the banking system because banks lost their market pressure to be honest and 2) the FED issued many more dollars than they held in gold reserves. By the 1930s when this leverage process started to reverse, the FED found itself bankrupt with no ability to pay their obligations (they openly admitted this), additionally the FED had become a centralized To Big To Fail entity that everyone relied on. Since the FED was both bankrupt and To Big To Fail at the same time, the US fully defaulted and FDR banned gold ownership to keep everyone in the banking system.

What is heartbreaking to read in this history, is instead of learning from their mistakes and return to a decentralized and market based system that worked, FDR doubled down and created regulations in the place of market forces and banned individual ownership of money, and he was cheered for it. This is the moment America choose security over freedom and when the experiment failed IMHO.

The point to this long winded post is paper backed gold can (and did) work, it's just that it requires a decentralized system that can withstand individual failures and uses market forces to keep honesty. Sound familiar?
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February 04, 2015, 06:41:02 AM
 #21012

...
Yes Bitcoin provides a superior SoV function, but it has a superior Payment-Function to fiat and that is what will slowly win over individuals. Essentially Bitcoin provides all the benefits of fiat ledger money with the benefits of direct control/interaction (no middlemen), this combined with personal computing creates a vastly superior Payment-Function, which is what will drive adoption.
...


Bitcoin has a superior payment function *right now*. In theory, there's nothing preventing a cheap, global, fiat payment system except rent-seeking and politics. Granted those are strong forces, but in the face of enough competitive pressure from Bitcoin, the legacy system will be spurred to improve. That may already be happening as a direct result of Bitcoin, if you read between the lines of the Fed's recent payment-system-improvement paper.

So I think we need to expect that the legacy payment system is going to get a lot better quickly. Bitcoin will still have many broader payment-sys advantages (eg, no international friction, immunity to capital controls, etc), but the day-to-day "save 3% on CCs", or "don't wait 3 days for an EFT" arguments are going to be moot at some point in the not too distant future. Best to be conscious of that now in order to focus efforts where BTC has the longrun advantage.

Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.
But Bitcointalk & /r/bitcoin are heavily censored. bitco.in/forum, forum.bitcoin.com, and /r/btc are open.
Best info on Casascius coins: http://spotcoins.com/casascius
grendel25
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February 04, 2015, 06:48:05 AM
 #21013

global economies trending up so oil and gold trend down.  I wish I had a Million dollars to buy oil right now... could be so rich when the price goes back up and we all know it will

BTC: 16vaBbHP6yqG5sc93ubXTY4icQhCScKWah
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February 04, 2015, 07:54:59 AM
 #21014

global economies trending up so oil and gold trend down.  I wish I had a Million dollars to buy oil right now... could be so rich when the price goes back up and we all know it will

you could gain what? 100%?
sidhujag
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February 04, 2015, 01:52:45 PM
 #21015

global economies trending up so oil and gold trend down.  I wish I had a Million dollars to buy oil right now... could be so rich when the price goes back up and we all know it will
dont be so sure

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February 04, 2015, 02:11:25 PM
 #21016

global economies trending up so oil and gold trend down.  I wish I had a Million dollars to buy oil right now... could be so rich when the price goes back up and we all know it will

http://www.zerohedge.com/news/2015-02-03/another-conspiracy-theory-becomes-fact-entire-oil-collapse-all-about-crushing-russia
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February 04, 2015, 02:17:43 PM
 #21017

global economies trending up so oil and gold trend down.  I wish I had a Million dollars to buy oil right now... could be so rich when the price goes back up and we all know it will

http://www.zerohedge.com/news/2015-02-03/another-conspiracy-theory-becomes-fact-entire-oil-collapse-all-about-crushing-russia

hmm i was more into the theory about saudi arabia (or even russia?!) crushing oil to fuck with USA and their shale gas investments.
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February 04, 2015, 02:25:07 PM
 #21018

global economies trending up so oil and gold trend down.  I wish I had a Million dollars to buy oil right now... could be so rich when the price goes back up and we all know it will

http://www.zerohedge.com/news/2015-02-03/another-conspiracy-theory-becomes-fact-entire-oil-collapse-all-about-crushing-russia

hmm i was more into the theory about saudi arabia (or even russia?!) crushing oil to fuck with USA and their shale gas investments.

Who knows, geopolitics is like a real life Inception!
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February 04, 2015, 05:42:43 PM
 #21019

What is heartbreaking to read in this history, is instead of learning from their mistakes and return to a decentralized and market based system that worked, FDR doubled down and created regulations in the place of market forces and banned individual ownership of money, and he was cheered for it. This is the moment America choose security over freedom and when the experiment failed IMHO.

"If a problem seems intractable, enlarge it"

This is a commonplace government solution method, and it is often how we get bigger governments.

The point to this long winded post is paper backed gold can (and did) work, it's just that it requires a decentralized system that can withstand individual failures and uses market forces to keep honesty. Sound familiar?

More recently, the Liberty Dollar.  A gold and silver backed ledger using warehouse receipts, audited monthly.  All the audits were perfect and showed zero leverage.  The US federal government could not believe that someone would actually do this (because they don't) and so accused it of fraud and counterfeiting and conspiracy.  As it turned out there wasn't any fraud, and after fighting the case for the last 6 years, the government is finally returning the gold and silver.

FREE MONEY1 Bitcoin for Silver and Gold NewLibertyDollar.com and now BITCOIN SPECIE (silver 1 ozt) shows value by QR
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February 04, 2015, 07:06:40 PM
 #21020

https://twitter.com/napoleon/status/563046879295197184
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