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 Author Topic: Bitcoin as a GET System  (Read 9054 times)
Red
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 August 20, 2010, 04:44:41 PM

In this case there is not less money, but it is worth more. Is it still a problem?
That is not a problem. It is the intended way of dealing with value using a LETS approach.

In fact if you are simply bringing charity, you do not have to be part of the system at all. Or you could barter one Lincoln Towncar for one authentic string friendship bracelet. That does not require participation in a system intended to tie you to the community.

One of the things I have been struggling with is the basis for "the value of money". You allude to the equation (fixed total currency)*(currency value)=(total value of non-currency commodities).

So if total value increases and currency remains fixed then, currency value must increase. However this equation does not really apply to LETS. I've convinced myself it doesn't apply to money in general.

If a potter and a baker join a LETS community, the system doesn't record how much bread or pots they own. Nor does the system take note when they bake more bread or create more pots.

The currency quantity is bounded but elastic so it need not vary in value. So if both the baker and the potter start with zero balances, then if the baker needs a pot, he simply takes one and tallies the LETS credits to reflect this. Potter +=1, Baker -= 1.

Now if the clay digger is hungry he gets bread from the baker and he tallies his actions. Baker += 1, Digger -= 1. Eventually the potter will need more clay so he gets it from the digger and updates the tallies. Digger += 1, Potter -= 1.

Now everyone's balances are zero again. Meaning the total amount of credit/currency circulating = zero. However, there is an increase in total commodities (pots).

Therefore commodities can increase without price deflation. Credit/currency can increase without causing price inflation.
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Legendary

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 August 20, 2010, 06:28:31 PM

I like the tally system analogy. I think this is the closest description so far of what we are trying to do with Bitcoin.

I'm afraid that I don't get the GETS system.

You claim that a tally system is the best analogy while in the same post admit that you don't understand the LETS/GETS analogy.  You invalidate yourself, as your statement that a tally system is the best cannot be considered authoritiative in any sense because you don't understand at least one alternative.

The tally system is basicly a system of national debt, closer to US Treasury Bonds than even a currency.  The king would need gold & silver to fund an army, but experience tells him that soldiers don't take kindly to paper promises, so he would need to get that gold and silver somewhere.  The treasury almost never had enough, so ultimately he would take a loan from the goldsmiths of the country.  The accounting would involve the etching of the sum of the debt on two ends of a stick, and then the stick would be broken in half.  Traditionally, the goldsmith would keep whichever end was shorter in his vault as proof that a debt had incurred, and the treasury would keep the other end as proof of the debt.  The debt could be claimed, eventually, by anyone who had the proper stick that fit with the end that the treasury held.  It was a bearer bond.

Here's the problem.  As you mentioned, kings sometimes lost, and when they didn't they were often to broke to repay.  So, being the soverign, he would just declare 'ursury' illegal and the debts void.  There was nothing that the goldsmiths could do about it, and they would be bankrupted because they probably lent gold that was  being held for others, not just his own.  This is literally where we, in or modern English speaking world, get the phrase "he got the short end of the stick".

In a LETS system, credit is created between two parties with a set value in a local or familiar unit, and that credit can be thus traded away in the same way as a tally system could, with or without a physical symbol of that debt.  However, it is also possible that someone could fail to repay the LETS debt.  This is not realisticly possible in the basic design of Bitcoin, since a good or service must be provided first.  The only way for a default is if the Bitcoin system itself were to fail, and thus all positive account holders would see their value drop to zero.  Any banking or debt system imposed upon the system would be a third party add-on.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
Red
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 August 20, 2010, 06:39:00 PM

Noagenda, I like the tally stick as metaphor. However it suffers from the same limitation as GETS/LETS. If you don't already know what they are, you have to look them up first. :-)

I really think bitcoin is two concepts merged into one term.

1) the global distributed tally system (currency-ness)
2) the fixed quantity policy (commodity-ness)

I created the GETS concept as a way to talk about the currency aspects independent of the commodity aspects. I think your tally system fits here appropriately but I need to study more.

(And I don't need to hear that both can be avoided by saying "it's just a convenience, Fresno)

A zero based LETS system doesn't suffer from the "tyranny of timing" that I've pointed out and Galuel seems to have devoted his life to. That means hiding "progressivism" in the monetary policy is unnecessary. That was why he had to lock the UD topic. It simply isn't a universal necessity.

----

However, the key thrust of all banker/money changer arguments seems to be that these people get something that they are not deserving of because they did not do an amount of work proportional to the benefit they receive. They all seem to be "fairness" arguments.

LETS groups solve this problem in the most generalized way possible. They simply say, the point is not for you to compile credits so you can stop working and retire. The point is to keep us all working together for our common benefit. That's its hippie-ness. There is no subsidy/tax for delayed gratification.

Bitcoin is decidedly not hippie. The community loves bitcoins limited commodity-ness. As such they are almost giddy at its delayed gratification subsidy. (price deflation) It is supposedly fairer because anyone can get free stuff like bankers. They don't even have to understand banking.

Galuel, interestingly was proposing a monetary policy with a built in tax on delayed gratification. (monetary inflation to cause redistribution of wealth) It is supposedly fairer because it penalizes bankers to support workers.
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 August 20, 2010, 06:53:29 PM

So if total value increases and currency remains fixed then, currency value must increase. However this equation does not really apply to LETS. I've convinced myself it doesn't apply to money in general.

You would make a fine economics student.  You are correct on your basic observation, there are many variables that affect the perception of value of a currency.  However, despite the common usage, "money" and "currency" are not interchangable terms within economic theory.  Money has a certain set of characteristics, most of which a currency also has, but with a notable exception.  Money can be a currency, but not all currencies are money.  The reason is that currencies represent a debt of whatever trusted institution that created them, usually a government (fiat) but sometimes a private entity (banks can issue banknotes, private companies issue bonds).  However, if the currency is itself devised of a material that has value unto itself, it's money.  Although a minted silver coin issued by an institution can still represent a debt of that institution, and therefore trade with a unit value greater than the silver itself, the silver coin represents a minimum value by virtue of the silver content of the coin itself.  A silver certificate, however, represents a debt because it is a promise to exchange a note (another name for a loan contract) for the exact amount of silver that is printed onto it's face.  Yet a silver certificate will become worthless in the absence of that promise whereas the silver coin will not.

Since Bitcoin is neither an object with value unto itself, nor does it represent a definable debt of anyone or any institution; Bitcoin is technically neither money nor a currency, even though both those terms are convient for expressing the *function* of Bitcoin.  This is why I noted in another thread that Bitcoin was something altogether different and new in the realm of economics.  To call it a 'cryptocurrency' is as good a term as any, provided that we are willing to note that word means that it is a system with the *function* of a currency within a realm that currencies don't function well.  We would be wise to note, also, that 'cryptocurrency' does not imply that the system shares the common accepted characteristics of a currency.  It is some of those very same characteristics that make existing currency regimes unsuited to online commerce.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
Red
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 August 20, 2010, 07:06:04 PM

These are great definitions. Here as in the rest of my life I struggle with naming things appropriately. I will try to use these definitions consistently in the future.

How would you describe LETS credits? The have long ends and short ends like split tally sticks, so currency seems superficially appropriate.

I'd never given two seconds thought to economics before I came here! :-)
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 August 20, 2010, 07:18:05 PM

These are great definitions. Here as in the rest of my life I struggle with naming things appropriately. I will try to use these definitions consistently in the future.

How would you describe LETS credits? The have long ends and short ends like split tally sticks, so currency seems superficially appropriate.

I'd never given two seconds thought to economics before I came here! :-)

LETS credits are, indeed, 'currency-like' in function; yet are not a currency.  This is why the LETS communities had to define the term 'mutual credit' first.  LETS is like a unified standard for private bearer bonds, where all the bonds are defined in an agreed upon unit and agreed upon rules.  LETS is also, at the same time, a market and clearinghouse for those same standardized bonds.  This is why the 'market capitalization' equation that you referred to before fails with regard to LETS.  The regular creation and destruction of the LETS credits are an intended function of the system, and therefore are not a destablizing economic force.  As you mentioned, LETS is intended only to be a means of trade and not of savings, and is therefore not well suited towards savings.  It is the design of currencies in general to be a unit of both trade and savings value, and it is the future expectation of value that drives the increase in a currency's value during times of deflation of the monetary base.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
Anonymous
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 August 21, 2010, 04:36:01 AM

LETS is a favour based currency.
mizerydearia
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 August 24, 2010, 07:12:26 AM

....and so we begin the system again using bitcoin.Will it go down the same path as the original Tally Stick system?Who can tell.One thing is for sure and that is there are powerful interests out there who would shut it down as soon as they realise its revolutionary value.

Quote
<necrodearia> What methods can be pursued to "shut it down" or to cause Bitcoin currency to fail or cease to continue/exist?
<necrodearia> What safeguards exist if any/necessary to prevent such from happening?
<necrodearia> Perhaps it is fairly simple in that someone can create infinite amount of USD and use that to buy all Bitcoins?
<necrodearia> Perhaps allowing the exchange of Bitcoins to other currencies is its weakest link?
hugolp
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 August 24, 2010, 07:23:32 AM

....and so we begin the system again using bitcoin.Will it go down the same path as the original Tally Stick system?Who can tell.One thing is for sure and that is there are powerful interests out there who would shut it down as soon as they realise its revolutionary value.

I agree with the others that say that the tally stick and bitcoins are not similar at all. In fact, they are opposites. The tally stick was a government imposed currency. Bitcoin is a voluntary currency. Nobody forces you to accept it like the tally sticks.

A better analogy for bitcoin could be the private mints of the UK XVII century.

PS: The fact that the king used tally sticks to fight powerfull people in England does not make them legit. The king wanted the power to keep his authoritative regime, to fund wars, etc... There is nothing noble in tally sticks, just another government forcing a currency on the people because it had the swords.
Anonymous
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 August 24, 2010, 11:16:53 AM

....and so we begin the system again using bitcoin.Will it go down the same path as the original Tally Stick system?Who can tell.One thing is for sure and that is there are powerful interests out there who would shut it down as soon as they realise its revolutionary value.

I agree with the others that say that the tally stick and bitcoins are not similar at all. In fact, they are opposites. The tally stick was a government imposed currency. Bitcoin is a voluntary currency. Nobody forces you to accept it like the tally sticks.

A better analogy for bitcoin could be the private mints of the UK XVII century.

PS: The fact that the king used tally sticks to fight powerfull people in England does not make them legit. The king wanted the power to keep his authoritative regime, to fund wars, etc... There is nothing noble in tally sticks, just another government forcing a currency on the people because it had the swords.

They are similar in that they are almost impossible to counterfeit and they keep a record of value.I did not say I agreed with government force or that it is legitimate.
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 August 24, 2010, 12:21:50 PM

I agree with the others that say that the tally stick and bitcoins are not similar at all. In fact, they are opposites. The tally stick was a government imposed currency. Bitcoin is a voluntary currency. Nobody forces you to accept it like the tally sticks.

A better analogy for bitcoin could be the private mints of the UK XVII century.

PS: The fact that the king used tally sticks to fight powerfull people in England does not make them legit. The king wanted the power to keep his authoritative regime, to fund wars, etc... There is nothing noble in tally sticks, just another government forcing a currency on the people because it had the swords.

They are similar in that they are almost impossible to counterfeit and they keep a record of value.I did not say I agreed with government force or that it is legitimate.

Agreed then. I misread what you were trying to say.
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 August 24, 2010, 09:30:54 PM

I posted this thread to my roommate, intending to show them http://bitcointalk.org/index.php?topic=872.msg10356#msg10356

Their response (at the time knowing nothing about Bitcoin until reading it):

Quote
hmm. it's very interesting. a global 'micro' currency. i'm happy for it. but at this point in time, i'm more interested in things that increase inflation for the dollar - things that can overburden the current economy - it's nice to know that people are coming up with options, but the status quo needs to change significantly before any solutions can be concretely implemented.

I'm not sure how to respond.  Anyone care to respond to the quoted part and I'll relay to him since I highly doubt he will have any interest to post on this forum.
Red
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 August 24, 2010, 10:02:31 PM

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but at this point in time, i'm more interested in things that increase inflation for the dollar - things that can overburden the current economy
What type of political bent is interested in increasing inflation? Seems either an extreme progressive, or just a crash everything because I want to need me to save it type.
ichi
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 August 24, 2010, 10:10:10 PM

Actually, many governments are counting on inflation to shed their debt
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 August 24, 2010, 11:50:03 PM

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but at this point in time, i'm more interested in things that increase inflation for the dollar - things that can overburden the current economy
What type of political bent is interested in increasing inflation? Seems either an extreme progressive, or just a crash everything because I want to need me to save it type.

Currently there is international trade pressures to devalue national currencies everywhere to favor export oriented industries.  This is a temporary effect, and one not likely to work just now even in the short term if every major trade nation is trying to do the same thing for the same reason.  Reality, however, rarely gets in the way of a bad economic idea, so on some level it is happening in the US and the EU.  In the long term, such pressures ultimately result in a long term increase of the monetary base in absolute currency numbers, which is the economic root cause of inflation.  This *usually* leads to "price inflation" on an 18 month lag, but may not be evenly distributed across all industries for various reasons, and usually doesn't lead to "excessive" inflation in any case.  Yet, inflation it is, and it has the effect of being a regressive tax on savings, as it slows rots away the buying power of all the currency in circulation without regard to who owns it or why they may be holding onto it.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
mizerydearia
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 August 25, 2010, 01:28:06 AM

Quote from: roommate
hyperinflation, from a political perspective rather than an economic perspective, could destabilize the united states towards decentralization, lead to the collapse of the federal reserve, incite riots against the dollar and fiat currency and capitalism in general, generate necessity-forced dependance on local and sustainable systems, and, as an antidote to apathy, contribute to a massive increase in collective awareness.
Legendary

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 August 25, 2010, 01:55:56 AM

Quote from: roommate
hyperinflation, from a political perspective rather than an economic perspective, could destabilize the united states towards decentralization, lead to the collapse of the federal reserve, incite riots against the dollar and fiat currency and capitalism in general, generate necessity-forced dependance on local and sustainable systems, and, as an antidote to apathy, contribute to a massive increase in collective awareness.

Hyperinflation also has the bad history of resulting in oppressive regimes.  Why anyone would *desire* the hyperinflationary death of the US FRN in the absence of a probable replacement I do not know.  The very idea of it brings up verses from Revelations in my mind.  Neither gold nor silver would likely become an easy replacement for a FRN, as such changes require intentional (and preferablely prior) planning, and *never* occur smoothly.  Perhaps Bitcoin could become such a probable replacement for the FRN and every other fiat currency as predicted in "Snow Crash", but that remains to be seen.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
Red
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 August 25, 2010, 03:14:52 AM

Quote from: roommate
hyperinflation, from a political perspective rather than an economic perspective, could destabilize the united states towards decentralization, lead to the collapse of the federal reserve, incite riots against the dollar and fiat currency and capitalism in general, generate necessity-forced dependance on local and sustainable systems, and, as an antidote to apathy, contribute to a massive increase in collective awareness.

Thank you for that quote.

It sounds just ordinarily anti-social until you get to "contribute to a massive increase in collective awareness" then it gets implausible and silly. No offense to your roommate, it's just not my first trip to the enlightenment rodeo.
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 August 25, 2010, 05:47:03 AM

Right.  Consider the consequences of the Great Depression in the USA vs those of Weimar hyperinflation.

We're perhaps heading for a hyperinflationary great depression
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 August 25, 2010, 06:04:18 AM

Right.  Consider the consequences of the Great Depression in the USA vs those of Weimar hyperinflation.

We're perhaps heading for a hyperinflationary great depression

Perhaps, but I doubt it.  Hyperinflation always and everywhere requires the willfull participation of those who control the printing presses. In every case that I can think of, that required that the political class have the authority to create new currency, and would do so for political reasons not economic reasons.  In the US the  federal government does not control the Federal Reserve.  It's more like the other way around.  And since hyperinflation, once begun, is a death spiral; those who do have control over the monetary base have a vested interest in the continuance of the status quo.  To allow, or even risk, a hyperinflationary event would be so catastrophic to their personal fiefdoms that few would be willing to go along quietly, even if there was much to be gained politically.

Far more likely is an old fashioned deflationary Greater Depression, the great 'they' have less to lose that way.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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