Gold collapsing. Bitcoin UP.

[cypherdoc]

I describe the mechanisms by which cryptocurrencies — a subcategory of virtual currencies — could replace tax havens as the weapon-of-choice for tax-evaders. I argue such outcome is reasonably expected in the foreseeable future due to the contemporary convergence of two processes. The first process is the increasing popularity of cryptocurrencies, of which Bitcoin is the most widely recognized example. The second process is the transformation of financial intermediaries to agents in the service of tax authorities, as part of the fight against offshore tax evasion. Financial institutions are faced with increased governmental pressure to deliver information about account holders, to withhold taxes from earnings accumulating in financial accounts, and to remit such taxes to taxing authorities around the world. Significantly, cryptocurrencies possess all the traditional characteristics that tax haves do; Earnings are not subject to taxation, and taxpayers’ anonymity is maintained. The operation of cryptocurrencies, however, is not dependent on the existence of financial intermediaries. Thus, cryptocurrencies have the potential of defeating the recent successes of governments in battling offshore tax evasion. I further suggest that while governments have paid some attention to this issue, they have so far failed to identify the acuteness of the potential problem.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2305863

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[Peter R]

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2305863

The full paper is available for download.  It's quite well-written and worth a read. Here are some highlights that caught my eye:


The paper reads as though the growth of bitcoin is inevitable given its properties:




The author points out some interesting implications of a mature bitcoin economy:




This overreaching proposal would hurt global innovation, resulting in less wealth production in aggregate:




Although a market-based solution like this may not completely accomplish its goals of owning 100% of the bitcoins, an initiative where central banks bought up a significant amount of coins might still produce positive effects:

[tabnloz]

Although a market-based solution like this may not completely accomplish its goals of owning 100% of the bitcoins, an initiative where central banks bought up a significant amount of coins might still produce positive effects:

The political environment should ensure this doesn't happen. When growth and jobs have been mere mirages for so long, the prospect of a crypto led renaissance is a vote winner. Candidates look forward thinking, innovative and fresh even though the thinking is short term ie, getting elected.

If the CB's were to buy up, would this not make the circulating (not in their hands) btc more valuable?

[justusranvier]

If the CB's were to buy up, would this not make the circulating (not in their hands) btc more valuable?

"Please don't throw us into the briar patch, central banks!"

[Chicowash]

Although a market-based solution like this may not completely accomplish its goals of owning 100% of the bitcoins, an initiative where central banks bought up a significant amount of coins might still produce positive effects:

https://i.imgur.com/iAFPs1J.png

The political environment should ensure this doesn't happen. When growth and jobs have been mere mirages for so long, the prospect of a crypto led renaissance is a vote winner. Candidates look forward thinking, innovative and fresh even though the thinking is short term ie, getting elected.

If the CB's were to buy up, would this not make the circulating (not in their hands) btc more valuable?

I can not see this happening for real, there is too much power in the hands of asic manufacters, but that is only if governments realy decide to just buy those manufacters, than we could be in trouble. For a short while it could cause price to rise up.

[Peter R]

Although a market-based solution like this may not completely accomplish its goals of owning 100% of the bitcoins, an initiative where central banks bought up a significant amount of coins might still produce positive effects

If the CB's were to buy up, would this not make the circulating (not in their hands) btc more valuable?

Hence some of the positive effects

In all seriousness, the scenario where central banks hold bitcoin reserves is plausible.  It will be generations before the last of the Keynesians goes extinct; in the meantime, the temptation to manipulate the money supply will be too great.  If bitcoin becomes an important part of the economy, the only way manipulation will be possible is to hold a large fraction of the coin supply.  And I'm OK with this sort of monetary policy.  At least discipline will be enforced by the network, and not by some old-boy's club lender of last resort.  

[solex]

Although a market-based solution like this may not completely accomplish its goals of owning 100% of the bitcoins, an initiative where central banks bought up a significant amount of coins might still produce positive effects

If the CB's were to buy up, would this not make the circulating (not in their hands) btc more valuable?

Hence some of the positive effects

Joking aside, the scenario where central banks hold bitcoin reserves is plausible.  It will be generations before the last of the Keynesians goes extinct; in the meantime, the temptation to manipulate the money supply will be too great.  If bitcoin use continues to grow, the only way manipulation will be possible is to hold a large fraction of the coin supply.  And I'm OK with this sort of monetary policy.  At least discipline will be enforced by the network, and not by some old-boy's club lender of last resort.  

It amazes me that the Fed wasn't all over the SR coins with proxy buyers outbidding Tim Draper (or not outbidding, but Tim being told that they did). There must some people working there with a brain. The Fed should have analysts who can see that, even though crypto is unproven long-term, they can do huge risk mitigation by acquiring a holding which represents a few percent of the 21M possible Bitcoin. This goes for other CBs.

[Peter R]

Although a market-based solution like this may not completely accomplish its goals of owning 100% of the bitcoins, an initiative where central banks bought up a significant amount of coins might still produce positive effects

If the CB's were to buy up, would this not make the circulating (not in their hands) btc more valuable?

Hence some of the positive effects

Joking aside, the scenario where central banks hold bitcoin reserves is plausible.  It will be generations before the last of the Keynesians goes extinct; in the meantime, the temptation to manipulate the money supply will be too great.  If bitcoin use continues to grow, the only way manipulation will be possible is to hold a large fraction of the coin supply.  And I'm OK with this sort of monetary policy.  At least discipline will be enforced by the network, and not by some old-boy's club lender of last resort.  

It amazes me that the Fed wasn't all over the SR coins with proxy buyers outbidding Tim Draper (or not outbidding, but Tim being told that they did). There must some people working there with a brain. The Fed should have analysts who can see that, even though crypto is unproven long-term, they can do huge risk mitigation by acquiring a holding which represents a few percent of the 21M possible Bitcoin. This goes for other CBs.

Yes, it's not like it costs them anything to do so.  If they want to procure 500,000 BTC, they can create the money for the purchase out of thin air, add these dollars to the liability side of their balance sheet and add the 500,000 BTC to the asset side.  That's how the Fed works.  In fact, after TARP, they probably don't even need an act of Congress to start buying.

I keep saying that central banks get one final kick at the can: they can "sell out" by purchasing bitcoins with newly-created fiat until all confidence in fiat is lost.  Central banks would still have a big pile of coins to continue with monetary policy.  

[Erdogan]

Although a market-based solution like this may not completely accomplish its goals of owning 100% of the bitcoins, an initiative where central banks bought up a significant amount of coins might still produce positive effects

If the CB's were to buy up, would this not make the circulating (not in their hands) btc more valuable?

Hence some of the positive effects

Joking aside, the scenario where central banks hold bitcoin reserves is plausible.  It will be generations before the last of the Keynesians goes extinct; in the meantime, the temptation to manipulate the money supply will be too great.  If bitcoin use continues to grow, the only way manipulation will be possible is to hold a large fraction of the coin supply.  And I'm OK with this sort of monetary policy.  At least discipline will be enforced by the network, and not by some old-boy's club lender of last resort.  

It amazes me that the Fed wasn't all over the SR coins with proxy buyers outbidding Tim Draper (or not outbidding, but Tim being told that they did). There must some people working there with a brain. The Fed should have analysts who can see that, even though crypto is unproven long-term, they can do huge risk mitigation by acquiring a holding which represents a few percent of the 21M possible Bitcoin. This goes for other CBs.

Yes, it's not like it costs them anything to do so.  If they want to procure 500,000 BTC, they can create the money for the purchase out of thin air, add these dollars to the liability side of their balance sheet and add the 500,000 BTC to the asset side.  That's how the Fed works.  In fact, after TARP, they probably don't even need an act of Congress to start buying.

I keep saying that central banks get one final kick at the can: they can "sell out" by purchasing bitcoins with newly-created fiat until all confidence in fiat is lost.  Central banks would still have a big pile of coins to continue with monetary policy.  

You forget that current policy is based on continually expanding, continually expanding the expansion (exponentially increase) of the money supply (including debt). With bitcoin, the only thing that is theoretically possible, is for the central bank to smooth out the volatility, in reality they can not do that either (because they can not look into the heads of the economic actors (everybody) (yet).

[wachtwoord]

Ragrding the earlier discussion in this topic regarding block limit has everyone read http://www.reddit.com/r/Bitcoin/comments/2d7ofh/technical_discussion_of_gavins_o1_block/ interesting summary.

[jmw74]

I keep saying that central banks get one final kick at the can: they can "sell out" by purchasing bitcoins with newly-created fiat until all confidence in fiat is lost.  Central banks would still have a big pile of coins to continue with monetary policy.  

I wonder how many coins they could get if they started doing this today. 

I'm guessing a good chunk - 1/3 of all in existence at least.  A lot of people would sell their coins before it was clear who was buying them.  And then it would take a bit to realize the CB's intention.  It would take some very high prices before everyone knew what was happening.  Over $100k, I'd guess.  We could hit $10k and nobody would even suspect it was any different than previous bubbles.

[SkRRJyTC]

Is it just me or were premiums almost double a year or two ago?

1 oz Gold Bar - Credit Suisse (In Assay)
Any quantity only $21.99 per bar over spot!
- See more at: http://www.apmex.com/product/11950/?&RILT=Link_1oz-CreditSuisse-GoldBar&utm_source=Responsys&utm_medium=email&utm_campaign=Non-Purchaser%20Conversion#sthash.mR23LWlQ.dpuf

[cypherdoc]

I keep saying that central banks get one final kick at the can: they can "sell out" by purchasing bitcoins with newly-created fiat until all confidence in fiat is lost.  Central banks would still have a big pile of coins to continue with monetary policy.  

I wonder how many coins they could get if they started doing this today. 

I'm guessing a good chunk - 1/3 of all in existence at least.  A lot of people would sell their coins before it was clear who was buying them.  And then it would take a bit to realize the CB's intention.  It would take some very high prices before everyone knew what was happening.  Over $100k, I'd guess.  We could hit $10k and nobody would even suspect it was any different than previous bubbles.

the risk for them doing this would be enormous.

reputational risk would include a market perception of fear of Bitcoin and lack of confidence in USD.  it would be a clear signal that they believe their future is doomed.  just "being in the game" would not facilitate monetary policy manipulation which is the raison d'etre for their existence in the first place.

if ppl found out they were doing this, everyone and their mother would pile in driving the price even higher to stratospheric levels.  i suppose they could find a proxy buyer to accumulate coins but if they accidentally pick a Snowden-type, they'd be screwed.

CB's aren't smart investors as far as i'm concerned.  look at Gordon Brown's faux pas.  during the noughts, CB's in general were selling gold for the most part.  the recent buying by Russia and China, i believe, will go down in history as yet another mistake.

no, i think the CB's, especially the Fed, are "all-in" with fiat.  that's not good; for them.

[cypherdoc]

Litecoin in a death spiral:

[cypherdoc]

like i said, this sideways action for Bitcoin should serve to clean out a majority of alts; if i had my way, it'd clean out all of them.

[cypherdoc]

Is it just me or were premiums almost double a year or two ago?

1 oz Gold Bar - Credit Suisse (In Assay)
Any quantity only $21.99 per bar over spot!
- See more at: http://www.apmex.com/product/11950/?&RILT=Link_1oz-CreditSuisse-GoldBar&utm_source=Responsys&utm_medium=email&utm_campaign=Non-Purchaser%20Conversion#sthash.mR23LWlQ.dpuf

if true-->shit's on sale

[Wekkel]

Litecoin in a death spiral:

Not picking it up before USD 2.

[cypherdoc]

Litecoin in a death spiral:

Not picking it up before USD 2.

https://twitter.com/cypherdoc2/status/498889266903384064

[SkRRJyTC]

Is it just me or were premiums almost double a year or two ago?

1 oz Gold Bar - Credit Suisse (In Assay)
Any quantity only $21.99 per bar over spot!
- See more at: http://www.apmex.com/product/11950/?&RILT=Link_1oz-CreditSuisse-GoldBar&utm_source=Responsys&utm_medium=email&utm_campaign=Non-Purchaser%20Conversion#sthash.mR23LWlQ.dpuf

if true-->shit's on sale

I remember $45 - $55 per oz.

[cypherdoc]

i think the most important financial dynamic going on in the world today is Bitcoin vs Gold.  yes, there’s a component of Bitcoin vs Fiat but gold has always been the real money of centuries past.  the pure fiat game has only been around since 1971.  that is why i was a goldbug from 2005 to 2011 and why i started the gold threads:  Gold: I Smell a Trap and this one.  while the Keynesian’s and major CB’s would never admit that gold still plays any importance on the world stage, actions speak louder than words.  otherwise, why would India, China, and Russia continue to stock gold?  why would the Fed continue to spend millions on fortified storage facilities to stockpile what little they have left? we know that at some level, they covet it. unfortunately for CB’s, they’ve never been very good at calling markets ala Gordon Brown in 2000 selling off the UK’s gold followed by the others for much of the noughts.   enter gold’s Black Swan, Bitcoin.

i’m also surprised at how short memories are.  we’ve already kicked out 4.5/5 legs of the precious metal story:

1.  Silver:  remember how all the silver bugs like Eric Sprott and Max Keiser promised us that silver would lead the gold to massive new highs?  while gold was supposed to go to $35000, silver would head to $200 or something like that?  simply enough, Bitcoin did a Slingshot Effect-cypherdoc past silver easily in the Spring of 2013.  effortlessly, like a knife thru butter.  and yet goldbugs fail to understand/remember its significance.  what bigger a red flag to wave that Bitcoin is superior to metals?  Bitcoin has already been Silver’s Black Swan. no one in their right mind thinks silver will ever catch Bitcoin at this point.  this is an important clue to the big picture.  this is also why i don’t like Litecoin; we don’t need or want a Bitcoin’s silver.  Litecoin is doing a death spiral right now. imo, the only reason silver became a form of money in the first place was b/c of the high amount of friction in pm’s.  gold has a limited form of divisibility despite what you’ve been told.
2.  Miners:  oh Lordy.  this sector has been wiped out on it’s own merit, however, when compared to the performance of Bitcoin, it’s been a complete disaster.  i also think Bitcoin played a big part in that; look at the for sale of the recent gold mine for Bitcoin.  remember how miscreanity used to argue vociferously that miners were the ultimate leverage play on gold/silver itself?  how’s that turned out?  disastrously.  pay close attention to that excellent analysis as to the environmental and USD costs of pm mining.  that is unsustainable and undesirable.  http://www.coindesk.com/microscope-true-costs-gold-production/
3.  Gold itself:  did you all forget that Satoshi dared to touch the face of gold in price last November?  what did that tell us?  answer: a hell of a lot. i dare say that the next time Satoshi touches gold it will be with his fist thru the face of gold’s price.  we should get another Slingshot Effect-cypherdoc as the world realizes what the implications of Bitcoin will be.  that event should re-establish the logarithmic Bitcoin ramp we’ve seen in years past.  the seed of doubt in the minds of goldbugs has been planted and it will continue to blossom.
4.5.  we’re seeing one after another of former staunch gold bugs convert:  Turk, Schiff, Rogers, and possibly Casey and Rickards.  the momentum is clear.  they will be running to Bitcoin soon.