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Author Topic: Consequences of the possible USD crash?  (Read 1262 times)
speeder
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May 13, 2011, 04:17:03 PM
 #1

Hello!

I noticed, the USD had his... something, tripled (the money in the banks) during the crisis.
Also, I noticed, far less countries and people is accepting USD.
Also, I noticed, the US Congress was voting to raise the debt limit, because they are about to hit it, and hitting it means defaulting the US loans, something that would probably cause a worldwide crisis (the debt is almost 14 trillion... a default of that probably would make every single bank of the world go bankrupt, including country central ones).


So, it is quite possible (I am not sure of how likely this is to happen) that USD if not crash, at least will have some weird inflaction.

If that happen, what is the consequences for BTC? I mean, beside the BTC price skyrocketing in USD, it would get stronger in relation to actual goods? Weaker? Useless? More usefull? We that are buying BTC right now at 7 USD will lose our investment? Get more money?

I do not understand much of the market yet, only the sufficient to understand why fiat generates inflaction when government has debts (mainly because I am Brazillian, and Brazil is doing the same shit... seemly not learning from the 1990 mistakes when inflaction here hit 2000% yearly), but not sufficient enough to understand what will happen with BTC.

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Anth0n
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May 14, 2011, 07:31:02 AM
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If the value of the dollar decreases, the price of Bitcoin in USD will increase, just like the price of everything else. Simple as that.
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May 14, 2011, 07:55:59 AM
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If the value of the dollar decreases, the price of Bitcoin in USD will increase, just like the price of everything else. Simple as that.

Nothing is that simple.

Not only will there be more bucks to chase bitcoin just like there will be more bucks chasing carrots, but there will be a large unmet need for a liquid store of value (there already is, but it will grow). So bitcoin benefits on both sides.

Play Bitcoin Poker at sealswithclubs.eu. We're active and open to everyone.
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May 14, 2011, 01:51:33 PM
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If the value of the dollar decreases, the price of Bitcoin in USD will increase, just like the price of everything else. Simple as that.

Nothing is that simple.

Not only will there be more bucks to chase bitcoin just like there will be more bucks chasing carrots, but there will be a large unmet need for a liquid store of value (there already is, but it will grow). So bitcoin benefits on both sides.

Yes, I misread the question and didn't notice that it asked what would happen besides the price increase due to a weak dollar. I agree that people will look to store their wealth in alternative assets besides dollars, and that Bitcoin will be a viable alternative. If that is the case, then Bitcoins will increase in value much more than the dollar decreases.
Stephen Gornick
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May 14, 2011, 04:40:41 PM
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We may find out soon enough:



With price changes occurring at a greater frequency, consumers might become accustomed to not even knowing the price level at which an item should cost.  For instance, some have become desensitized to the always-changing price at the gas pump.

As long as payments to suppliers are made in a base currency (e.g., USD) then, the prices for goods and services sold for bitcoins will likely need to change at nearly the same frequency.  But in a hyperinflationary period frequently changing prices will not be an attribute known only to those buying and selling using bitcoins.

I could see bitcoin being useful in hyperinflationary times in a number of ways though.

Hyperinflation elevates the significance of one bitcoin property.  Payments sent using bitcoin clear faster than when sent using banking networks.  When accepting credit card for payment, a merchant loses about 3% to the payment card network fee.  If hyperinflation is occurring, the merchant could lose more yet if the merchant's buying power from the funds end up much less by the time those funds actually clear for spending a few days later.  In this regard, in hyperinflationary times Bitcoin is supreme.

I do not understand much of the market yet, only the sufficient to understand why fiat generates inflaction when government has debts (mainly because I am Brazillian

Maybe one day BTC will be used for price listings for the same reason that the URV once was.  :-)
  - http://www.npr.org/blogs/money/2010/10/04/130329523/how-fake-money-saved-brazil

but not sufficient enough to understand what will happen with BTC.

A lot of things could happen.  It all depends on where and when bitcoin spreads.  If those in investment finance start offering bitcoin as an investment vehicle and sell it on margin and that practice sees any uptake then that would cause huge bitcoin exchange rate volatility.

If the government's response to hyperinflation is price controls then an undergound economy would likely build.  A pseudonymous digital currency would likely find greater adoption in such an economy.

The following blog post and the comments made in response are some good reading:
  http://www.avc.com/a_vc/2010/09/apocalypse-and-bubbles.html
  specifically, the "Even in the midst of Apocalypse, things will get better" reply:
  http://www.avc.com/a_vc/2010/09/apocalypse-and-bubbles.html#comment-75257930

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