Bitcoin downfall MT Gox shut down.

[dre]

Democracy is not a relevant issue. A modern capitalist economy depends on the availability of capital which can be invested to create new wealth. If the stock of capital available to an economy is arbitrarily limited by the amount of a commodity available then the price of capital inevitably rises and the economy stagnates. The supply of properly managed fiat currency can rise and fall as the economy needs. This creates a more stable environment for everyone.

This is not to say fiat currencies don't have their own issues. Just that like democracy, their virtue is they are better than all other systems.

This is the conventional wisdom, but its not necessarily true.

First of all, fiat currencies are managed in the opposite way that you describe. They dont grow and shrink with the economy, in fact, when the economy goes into recession, thats actually when they make the most money.

The other problem is that all of this monetary expansion is borrowing against future goods and services. When the government makes new money it sells treasuries... bonds and bills to avoid inflation. So say that this is good for the economy is like saying running your household on credit card debt is good for your personally economy.... It is for a while... but then what. Commercial banking in this system is an outright obvious act of theft and fraud. I just got a mortgage on an investment property in the last week... and every single Canadian is deeper in debt because of it, and the people that are going to have to bear the burden of us running out economy on debt have not even been born yet. Commercial banking should be completely shut down.

And when you say fiat currency, all you are really talking about is BORROWING AND DEBT.

You are endorsing a system that you dont even have a basic understanding of.

[dre]

And furthermore...

EVEN IF you endorse the idea of fiat currency, you still have to take another big leap to endorse the debt/theft money system. If the government is underwriting all this borrowing and monetary expansion, then why are commercial banking fraudsters allowed to charge us interest on that money? Its not theirs to lend. Is it a good thing for the economy for all the people and businesses to have the extra debt caused by commercial banks siphoning money off the economy without providing any valuable service?

It could be easily replaced, with a system of self issued interest free fiat money with no adverse effects at all. It would still be fiat currency, but at least large criminal organizations would not be able to steal from the general public, who are the real origionators and underwriters of newly created money, and the ones on the hook for the public debt associated with each new dollar created.

Even the bankers themselves tried to warn us about the scam.

“The bank hath benefit of interest on all moneys which it creates out of nothing.” William Paterson, founder of the Bank of England in 1694, then a privately owned bank

“Let me issue and control a nation’s money and I care not who writes the laws.” Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.

“The few who understand the system will either be so interested in its profits or be so dependent upon its favours that there will be no opposition from that class, while on the other hand, the great body of people, mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.” The Rothschild brothers of London writing to associates in New York, 1863.

Edited February 26, 2014 by dre

[TimG]

First of all, fiat currencies are managed in the opposite way that you describe. They dont grow and shrink with the economy, in fact, when the economy goes into recession, thats actually when they make the most money.

And grow and shrink with the economy does not imply that the money supply shrinks when the economy shrinks - it implies the money supply responds to the needs to economy. The economy is not held hostage by the supply of an arbitrary commodity.

And when you say fiat currency, all you are really talking about is BORROWING AND DEBT.

So? Why is this bad? Low cost access to capital is greatest tool we have to enhance equality. The fact that some people get in over their heads is the price of freedom. Edited February 26, 2014 by TimG

[GostHacked]

And grow and shrink with the economy does not imply that the money supply shrinks when the economy shrinks - it implies the money supply responds to the needs to economy. The economy is not held hostage by the supply of an arbitrary commodity.

Actually it was held hostage. Greece is an example. The US and the housing bubble is another example. Canadian banks were also bailed out. How many global bank systems need to be bailed out before one understands there is a problem with the current system. All those points dre talks about is exactly the reasons why people started investing into things like Bitcoins.

The banks did indeed make threats if they did not get bail outs. And even then, some of the banks failed and some were merged and some were taken over. One of the most brilliant financial ploys by the big boys to make the gains for themselves. And even during the bailouts, CEOs made huge bonuses. Does that make any sense to you at all? Of course it does not make sense.

So? Why is this bad? Low cost access to capital is greatest tool we have to enhance equality. The fact that some people get in over their heads is the price of freedom.

Yes and most countries on this planet are running a debt. Please tell me who/what the US owes money to when they decide to fire up the printing presses?

And over their heads? How are you to know what is going on when your mortgage is sold to another entity, crammed in with other commodities and then repackaged and sold to other entities? And with each passing of the buck, money was made by the people moving the commodity along while leaving the end consumer paying for it all when it fails.

If you want to have faith in the current system, then the government needs to hold those accountable for it. But since we have barely seen ANY of that, you have a form of fascism where your government bails out a corporation.

Just more reasons why people started moving towards bitcoin. Anyone apologetic of the current system really has no clue how it works. The people running the system have no idea how it works.

Edited February 26, 2014 by GostHacked

[TimG]

Yes and most countries on this planet are running a debt. Please tell me who/what the US owes money to when they decide to fire up the printing presses?

The US government owes money to its bond holders which are mostly various sorts of pension funds.

Just more reasons why people started moving towards bitcoin. Anyone apologetic of the current system really has no clue how it works. The people running the system have no idea how it works.

Well, given the fact that you call the Canadian government purchase of secure mortgages from the banks a "bailout" it is safe to say that you know absolutely nothing about how the current system works. So you are not in any position to make claims about what others know and do not know. Edited February 26, 2014 by TimG

[Bonam]

And grow and shrink with the economy does not imply that the money supply shrinks when the economy shrinks - it implies the money supply responds to the needs to economy. The economy is not held hostage by the supply of an arbitrary commodity.

No... instead it's held hostage by a few individuals that influence decisions such as how quickly to grow/shrink the money supply. If you think these individual's decisions are, on average, more beneficial than random, then I guess that's an argument for the system. On the other hand, if these decisions are on average more harmful than random...

My thought is it'd be a hard task indeed to demonstrate that the net result of monetary policy, by, for example, the US government and private entities to which it has delegated power, have been beneficial overall.

I would prefer a system in which the market decides freely, rather than having a body such as the fed setting interest rates and making other such decisions. Years of artificially low interest rates to try to force people to borrow and spend at a time that they should be saving and re-building lost capital might result in better quarterly results for a little while, but is it really beneficial in the long term? Are such policies sustainable, or are they desperate attempts for short term gains to enhance re-election chances, with dire costs in the long term? Trillions of dollars in bond buying to try to prop up a stock market, inflating it to record highs despite an economic situation that does not at all look like a boom... good idea or bad idea?

In light of such decisions, one might almost prefer the random swings of price of some commodity. Or better yet would be a currency that is based on aggregate supply and demand of all products and services traded in that currency, and yet free of government intervention/manipulation, or at least where government has its ability to manipulate limited in the same way as other actors, based on how much of that currency they hold.

That is what bitcoin tries to do... it's price is based only on supply and demand for bitcoins, which reflects how useful people think bitcoins are, which reflects what they think they can buy and sell with bitcoins. As the bitcoin economy grows, it will gain greater stability, and with greater stability it will gain more users. Bitcoin has had a ton of scammers and failed enterprises, and certainly people that bought into such things could have lost their holdings. But it's important to note that people who simply bought and held bitcoins have seen remarkable returns every year, as bitcoins have gained greater adoption.

I just bought a new hard drive for my computer with bitcoins (or more precisely, with a fraction of a bitcoin). Just as easy and convenient as paying with credit card or paypal. More and more merchants accept it all the time, and ultimately that's what will determine its success or failure.. whether or not real people use it for real transactions.

[dre]

No... instead it's held hostage by a few individuals that influence decisions such as how quickly to grow/shrink the money supply. If you think these individual's decisions are, on average, more beneficial than random, then I guess that's an argument for the system. On the other hand, if these decisions are on average more harmful than random...

My thought is it'd be a hard task indeed to demonstrate that the net result of monetary policy, by, for example, the US government and private entities to which it has delegated power, have been beneficial overall.

I would prefer a system in which the market decides freely, rather than having a body such as the fed setting interest rates and making other such decisions. Years of artificially low interest rates to try to force people to borrow and spend at a time that they should be saving and re-building lost capital might result in better quarterly results for a little while, but is it really beneficial in the long term? Are such policies sustainable, or are they desperate attempts for short term gains to enhance re-election chances, with dire costs in the long term? Trillions of dollars in bond buying to try to prop up a stock market, inflating it to record highs despite an economic situation that does not at all look like a boom... good idea or bad idea?

In light of such decisions, one might almost prefer the random swings of price of some commodity. Or better yet would be a currency that is based on aggregate supply and demand of all products and services traded in that currency, and yet free of government intervention/manipulation, or at least where government has its ability to manipulate limited in the same way as other actors, based on how much of that currency they hold.

That is what bitcoin tries to do... it's price is based only on supply and demand for bitcoins, which reflects how useful people think bitcoins are, which reflects what they think they can buy and sell with bitcoins. As the bitcoin economy grows, it will gain greater stability, and with greater stability it will gain more users. Bitcoin has had a ton of scammers and failed enterprises, and certainly people that bought into such things could have lost their holdings. But it's important to note that people who simply bought and held bitcoins have seen remarkable returns every year, as bitcoins have gained greater adoption.

I just bought a new hard drive for my computer with bitcoins (or more precisely, with a fraction of a bitcoin). Just as easy and convenient as paying with credit card or paypal. More and more merchants accept it all the time, and ultimately that's what will determine its success or failure.. whether or not real people use it for real transactions.

You could probably introduce rules into the system to keep purchasing power somewhat stable. For example, you could tie it to a CPI, and when inflation the mining problems could get harder, and when theres deflation they could get easier.

I DO think price stability is important. I would not want to hire employees if I wasnt reasonable sure the medium of exchange wasnt somewhat stable, and I wouldnt sign any long term contracts at all.

I would actually prefer a system of interest free self issued credit completely managed by a computer program. It would track the credit scores, and the balance of trade for each person, which is really all thats required to find out how much capital a person should have access too. Instead of going to a commercial bank, you would just log into the system and find out how much credit is available for you, and download the money you need for you purchase/project/enterprise. Relative price stability could be achieved by tying the ammount of credit available to everyone to a good honest consumer pricing index.

You access to credit/capital is based directly on your ability to produce goods and services.

The primary goal of any new monetary system should be putting the commercial banking industry out of business completely, and ending all of the fraud and theft thats built into the current system, and doing away with the mathematical requirement for exponential growth. There would still be traditional investment banking which is a natural function of the economy, but no need for commercial banks and much less need for central banks as well.

Basically you just remove politicians and bankers from the equation. After all newly created money is REALLY backed by the ability of actors in the economy to product and consume products and services. They should be able to benefit from that directly without paying a dime of interest to anyone.

If the government wanted to avert recessions with tools like QE they could still do it... But they would have to do it the honest way. The would have set a bunch of currency aside, to inject into the economy as they see fit. They couldnt just create it, because all monetary expansion would be subject to the rules of the system.

The biggest problem for bitcoin or SIC or any other alternative currency though, is they are up against a massive and powerful cartell of well organized criminals that has successfully enslaved every economy on earth.

[Bonam]

You could probably introduce rules into the system to keep purchasing power somewhat stable. For example, you could tie it to a CPI, and when inflation the mining problems could get harder, and when theres deflation they could get easier.

Mining contributes only a small fraction of the bitcoins that flow through the economy in a given time period. Mostly, people use coins already long since mined, not newly mined ones. This will be even more the case as block reward continues to get halved until all the bitcoins are produced. Bitcoin is inherently deflationary, and that is one of the main problems people have pointed to regarding bitcoins as a currency.

I would actually prefer a system of interest free self issued credit completely managed by a computer program. It would track the credit scores, and the balance of trade for each person, which is really all thats required to find out how much capital a person should have access too. Instead of going to a commercial bank, you would just log into the system and find out how much credit is available for you, and download the money you need for you purchase/project/enterprise. Relative price stability could be achieved by tying the ammount of credit available to everyone to a good honest consumer pricing index.

First.... who writes the computer program, and what is the algorithm it uses? These decisions are still up to some body, whether it's the corporation that sets this system up, or the government agency that sets this system up. This system doesn't have any inherent ability to cut out influence/control by the rich and powerful, no more than our current system. Secondly, that's essentially already how it works. Apply for a line of credit, get approved for x amount based on an algorithm that determines your trustworthiness for credit, go online to "download" the money into your account as needed, for a small fee that is scaled off the amount that you borrow (interest). From the user side of things, your proposal only really reduces/eliminates the fee... not too revolutionary, really.

[TimG]

No... instead it's held hostage by a few individuals that influence decisions such as how quickly to grow/shrink the money supply.

Not really true. The money supply is controlled by billions of individual decisions to borrow money and/or invest money. Central banks try to send signals to the market that the market usually follows but the market does not always listen. The only time where central banks directly control the money supply is when they directly create/destroy currency but such actions are supposed to be very limited.

I would prefer a system in which the market decides freely, rather than having a body such as the fed setting interest rates and making other such decisions.

The entire point of a central bank is to dampens the excesses of the free market. This is necessary because the market is irrational and subject to fads. In the long term the market will find the right level but that does not mean much if lives are destroyed by short term swings. A good analogy is a digital clock which experiences ringing at each transition - ringing which can cause catastrophic failure if left unchecked. http://www.ehow.com/how_12007496_reduce-ringing-cmos-clock-signal.html

That is what bitcoin tries to do... it's price is based only on supply and demand for bitcoins, which reflects how useful people think bitcoins are, which reflects what they think they can buy and sell with bitcoins.

The same can be said of any fad like beenie babies or other collectable items.

But it's important to note that people who simply bought and held bitcoins have seen remarkable returns every year, as bitcoins have gained greater adoption.

A rapidly appreciating medium of exchange is worse than a rapidly depreciating medium of exchange. A market cannot function if the value of money is not predictable and that is what we are seeing with bitcoin. It may settle down if the market grows but I see no credible reason to believe it will be any different from the market for gold over the long term.

I just bought a new hard drive for my computer with bitcoins (or more precisely, with a fraction of a bitcoin). Just as easy and convenient as paying with credit card or paypal. More and more merchants accept it all the time, and ultimately that's what will determine its success or failure.. whether or not real people use it for real transactions.

A toy. The real measure of the worth of medium is whether two parties would enter into a long term contract in the medium. i.e. would you take out a 25 year mortgage in bitcoin? I assume no. Would you take out a 25 year mortgage in gold? It is a mature market so if your answer is no then why not? Edited February 27, 2014 by TimG

[GostHacked]

Not really true. The money supply is controlled by billions of individual decisions to borrow money and/or invest money.

This is false. There are a few hundred maybe. But not a billion. IF you are meaning a billion end users like you and me, then that is false as well. We do not control the money supply. The central banks and entities like the privately run Federal Reserve control the money supply.

Central banks try to send signals to the market that the market usually follows but the market does not always listen. The only time where central banks directly control the money supply is when they directly create/destroy currency but such actions are supposed to be very limited.

Every time someone gets a loan, you have this action of them directly creating money. It never gets destroyed, just devalued.

The entire point of a central bank is to dampens the excesses of the free market.

As of late it is doing the exact opposite and killing the free market. Up those interest rates, which is needed to have people start saving again.

The same can be said of any fad like beenie babies or other collectable items.

The only way Bitcoin will ultimately fail is when the banks and governments get involved and start shutting certain parts of that system down. This is already happening, so it already has been considered a threat to the current banking system.

A rapidly appreciating medium of exchange is worse than a rapidly depreciating medium of exchange. A market cannot function if the value of money is not predictable and that is what we are seeing with bitcoin. It may settle down if the market grows but I see no credible reason to believe it will be any different from the market for gold over the long term.

You are trying with some good arguments. However even though I am not a supporter of Bitcoin, but even if it fails, it is still a success. People are and have moved to bitcoins for many positive reasons.

A toy. The real measure of the worth of medium is whether two parties would enter into a long term contract in the medium. i.e. would you take out a 25 year mortgage in bitcoin? I assume no. Would you take out a 25 year mortgage in gold? It is a mature market so if your answer is no then why not?

The problem is you are treating Bitcoin like regular currency, which it is not. The only currency the banks will accept is the currency they make available to you. Major banks will NOT deal with bitcoin. One notion was to make a hard physical currency with bitcoin, which it can not be. By design it really cannot work that way.

Bitcoin is a decentralized currency system that is a mesh. It is not controlled by a bank or any government entity. It is completely outside the current global financial system. THAT is the appeal with Bitcoin. And that is the problem the banks have with it. Once they bring it into the fold for control, they have to treat it as a legitimate form of currency. Once they open the door for that, they open it for all other forms of cryptocurrencies, and other currencies that might be created. So better to nip it in the bud and make it difficult for Bitcoin users.

The banks want control as does the government. Can't have the people decide what they want for themselves. That would mean we live in a democracy!

These kinds of attacks are coming from the governments on direction of the banks. I cannot prove that theory, but it is a theory I am working on.

[dre]

Mining contributes only a small fraction of the bitcoins that flow through the economy in a given time period. Mostly, people use coins already long since mined, not newly mined ones. This will be even more the case as block reward continues to get halved until all the bitcoins are produced. Bitcoin is inherently deflationary, and that is one of the main problems people have pointed to regarding bitcoins as a currency.

First.... who writes the computer program, and what is the algorithm it uses? These decisions are still up to some body, whether it's the corporation that sets this system up, or the government agency that sets this system up. This system doesn't have any inherent ability to cut out influence/control by the rich and powerful, no more than our current system. Secondly, that's essentially already how it works. Apply for a line of credit, get approved for x amount based on an algorithm that determines your trustworthiness for credit, go online to "download" the money into your account as needed, for a small fee that is scaled off the amount that you borrow (interest). From the user side of things, your proposal only really reduces/eliminates the fee... not too revolutionary, really.

Actually I would consider the wholesale shut down of commercial banking, and the end of usury as pretty revolutionary.

And you dont pay a "small fee". If you have a mortgage amortized at 25 years for 300k, you will pay almost 250k in interest, to a party that contributed nothing at all, that a piece of software couldnt do, and didnt have the money to lend you in the first place.

Imagine the benefits to the economy if this parisitic leach thats forever sucking blood out of the economy while providing almost nothing in return was removed?

[GostHacked]

This is relevant for this discussion.

http://rt.com/op-edge/g20-financial-fairy-dust-990/

Several hundred million dollars have apparently disappeared in a meltdown at what was once ‘Magical: The Gathering Online Exchange’.

Simultaneously, G20 finance ministers enjoyed a weekend’s groupthink in Sydney and it was immediately obvious from the communique that somebody had been sprinkling mystical fairy dust on the memo as opposed to actually proposing anything resembling economic coherence.

Two pages of communique later, I am convinced the political classes really have lost the plot. Perversely, Mt. Gox may come and go but there is a certain coherence to bitcoin.

Communiques usually alleviate insomnia but the February 22-23 G20 message demonstrates how the political/central banker class has achieved a remarkable elevated state entirely devoid of attachment to the real world.

I think that last statement is ringing quite true and is quite obvious.

[TimG]

IF you are meaning a billion end users like you and me, then that is false as well. We do not control the money supply.

Collectively the billion users do control the money supply. Every time you buy something on a credit card you are creating money. When you pay your credit card bill you are destroying money.

The central banks and entities like the privately run Federal Reserve control the money supply.

They set interest rates which make it more or less attractive for individuals and corporations to expand the money supply by borrowing. It is still individual choices which trigger the change - not the bankers.

The only way Bitcoin will ultimately fail is when the banks and governments get involved and start shutting certain parts of that system down. This is already happening, so it already has been considered a threat to the current banking system.

Spare us your conspiratorial nonsense. Bitcoin is a threat to no one. No matter how many people choose to use it for transactions governments will always require that taxes be paid in the domestic currency and will pay benefits in the same. They will also require that the home currency be accepted by any businesses operating within their territory. This ensures that for the vast majority of people it will make no sense to work with anything other than the currency of their country.

Bitcoin is a decentralized currency system that is a mesh. It is not controlled by a bank or any government entity. It is completely outside the current global financial system.

It is no different from any currency set up by some new country. The main issues are credibility and trading volumes. Bitcoin trading volumns are tiny. The issues with the exchanges will severely damage bitcoin credibility. So it is going no where fast. Edited February 27, 2014 by TimG

[GostHacked]

Collectively the billion users do control the money supply.

Please explain how? How does someone like me have influence on the money supply?

Bitcoin can and is controlled by the people. No so with standard banks. Credit Unions seem to be different in some cases but is controlled by the patrons.

Every time you buy something on a credit card you are creating money. When you pay your credit card bill you are destroying money.

The money supply has never shrunk. The money is not destroyed, it is treated as revenue for the banks which allows them to dole out more fiat credit/debt via fractional reserve banking. The money never existed in the first place. It's all imaginary.

They set interest rates which make it more or less attractive for individuals and corporations to expand the money supply by borrowing. It is still individual choices which trigger the chance - not the bankers.

I agree people need to be responsible with their money as the government and banks should be responsible with their money AND our money. You still need to address why and how the banks got into trouble and how they all got bailed out. And how that cascaded around the world, because everything is so interconnected and the deliberate manipulation by those running the system.

If they are not responsible with their money OR your money, how do you expect to have control over your own financial situation? Of all the people who went to jail, we only saw really Madoff?? Why have no JP Morgan execs been arrested/charged? How can I have faith in that system when the thieves run the whole thing to begin with? And if the governments are not holding the banks accountable for the problems, how do they expect to earn respect and faith in the system? Criminals protecting criminals.

The irresponsibility from these people have allowed the problems to be international, national, state/provincial, municipal and right down to the individual.

The banks don't want you to save, they want you in perpetual debt and keep buying crap you don't need. How many of us Canadians carry a debt and what is the average debt? And where is most of their debt tied up in?

Why is a city in debt? Why is a country in debt? Who are all the countries in debt to? I think that is a valid question that needs to be asked.

Spare us your conspiratorial nonsense. Bitcoin is a threat to no one. No matter how many people choose to use it for transactions governments will always require that taxes be paid in the domestic currency and will pay benefits in the same. This ensures that for the vast majority of people it will make no sense to work with anything other than the currency of their country.

Right, once they start taxing it, they will be treating it as a legitimate recognized form of currency. You don't seem to understand how it works and how it is decentralized and you and I can perform transactions without dealing with a bank and will much much lower fees from some of these exchange. I can give you money that essentially acts like cash. We don't even have to deal with an exchange at all if we don't want to. Options is what Bitcoin is about.

It is no different from any currency set up by some new country. The main issues are credibility and trading volumes. Bitcoin trading volumns are tiny. The issues with the exchanges will severely damage bitcoin credibility. So it is going no where fast.

The trading volume has peaked of about 80 million (USD) Those are not tiny volumes.

https://blockchain.info/charts/trade-volume

And if you want to talk credibility, how do the banks have any more credibility than Bitcoin considering how reckless they have been with the global financial markets?

Any currency can take off if enough people use it and put value into it. And people are putting value in a decentralized currency that is not controlled by a central bank or any government.

[TimG]

Please explain how? How does someone like me have influence on the money supply?

Buy anything on your credit card. You just created money from nothing. Do you think the bank has assets equal to your limit just sitting waiting for you to use? Not a chance. The use of credit cards trigger the creation of money.

The money supply has never shrunk.

True. But that just means creation exceeds destruction. That does not mean that money is never destroyed. When you pay back a loan you destroy money.

Right, once they start taxing it, they will be treating it as a legitimate recognized form of currency.

If you are a resident of Canada and you make money from bit coins you hold then you are legally required to pay taxes on the CDN value of that income. If you run a business and accept sales in bitcoins you are legally required to report those sales to the Canadian government. You are also required to collect GST if the buyer is in Canada.

Bitcoins are not exempt from taxes but many people use bitcoins to evade taxes which obviously annoys governments. Given how upset people get about the rich sheltering income in the Cayman Islands I find it hard to believe that there will be any popular support for bitcoin transactions which cannot be followed by the government - if bitcoin ever moves beyond the toy it is today.

You don't seem to understand how it works and how it is decentralized and you and I can perform transactions without dealing with a bank and will much much lower fees from some of these exchange.

Sure. But transaction fees are a small part of the picture.

The trading volume has peaked of about 80 million (USD) Those are not tiny volumes.

5 trillion sloshes through the world currency markets each day. 80 million USD per day is roughly equivalent to the market for Icelandic Krona. It less than tiny - it is insignificant. Edited February 27, 2014 by TimG

[dre]

They set interest rates which make it more or less attractive for individuals and corporations to expand the money supply by borrowing. It is still individual choices which trigger the chance - not the bankers.

What an astonishingly silly over simplification. First of all Central banks dont set interest rates. Commercial banks do. Central banks merely set the overnight rate, which is the rate at which banks lend to each other. Banks can loan at any rate they want to, and my mortgages are all well below the rate set by the BOC. And central banks do an awful lot more than that. They inject money into the economy by purchasing securites, they enable commercial banks to engage in risky lending both by protecting them from bank runs, and insuring deposits, and they prop up banks in foreign countries sometimes to the tune of trillions of dollars.

[TimG]

What an astonishingly silly over simplification. First of all Central banks dont set interest rates. Commercial banks do. Central banks merely set the overnight rate, which is the rate at which banks lend to each other. Banks can loan at any rate they want to, and my mortgages are all well below the rate set by the BOC. And central banks do an awful lot more than that. They inject money into the economy by purchasing securites, they enable commercial banks to engage in risky lending both by protecting them from bank runs, and insuring deposits, and they prop up banks in foreign countries sometimes to the tune of trillions of dollars.

I don't have time to dissect and unravel this nonsense. It is not all false but you completely misrepresent what is actually going on. The bottom line is the market determines how much money is created and the central bank can indirectly influence the amount of money creating with the overnight rate which does affect mortgage rates but not directly or immediately. Edited February 27, 2014 by TimG

[GostHacked]

Buy anything on your credit card. You just created money from nothing. Do you think the bank has assets equal to your limit just sitting waiting for you to use? Not a chance. The use of credit cards trigger the creation of money.

Incorrect. You are creating debt, not money.

True. But that just means creation exceeds destruction. That does not mean that money is never destroyed. When you pay back a loan you destroy money.

You are destroying debt, not money. There is a difference between the two.

If you are a resident of Canada and you make money from bit coins you hold then you are legally required to pay taxes on the CDN value of that income. If you run a business and accept sales in bitcoins you are legally required to report those sales to the Canadian government. You are also required to collect GST if the buyer is in Canada.

If it gets taxed, then it is treated as a legitimate form of currency. That is something the banks don't want, and governments don't want. They do not want Bitcoin to be taken as a legitimate form of currency. It's a direct threat to their banking model, because Bitcoin is not centralized and cannot be controlled by any one group.

So the answer is to cause issues via denial of service of the exchange networks. What we see with the attack on Mt Gox is financial terrorism by definition.

Bitcoins are not exempt from taxes but many people use bitcoins to evade taxes which obviously annoys governments. Given how upset people get about the rich sheltering income in the Cayman Islands I find it hard to believe that there will be any popular support for bitcoin transactions which cannot be followed by the government - if bitcoin ever moves beyond the toy it is today.

There is nothing governing Bitcoin. If you start, then you destroy what the intention and purpose of Bitcoin. You cannot pay taxes in Bitcoins. You would have to convert the Bitcoins to US currency, THEN pay your taxes.

5 trillion sloshes through the world currency markets each day. 80 million USD per day is roughly equivalent to the market for Icelandic Krona. It less than tiny - it is insignificant.

Five trillion of debt is sloshed around. Most of the money is in the hands of the few.

[TimG]

Incorrect. You are creating debt, not money.

I set up a website. You pay $10 for a monthly electronic newsletter on stamp collecting with your credit card. The credit card company deposits $10 into my bank account. That $10 is new money that did not exist anywhere until you clicked submit on the web form.

If it gets taxed, then it is treated as a legitimate form of currency. That is something the banks don't want, and governments don't want. They do not want Bitcoin to be taken as a legitimate form of currency.

You don't understand how the tax laws work today. The tax department does not care how you complete a transaction. If a profit is made taxes are due. Bitcoin is just another form of bartering as far as the tax dept is concerned and if you don't pay taxes you are breaking the law. Edited February 27, 2014 by TimG

[GostHacked]

I set up a website. You pay $10 for a my monthly electronic newsletter on stamp collecting with your credit card. The credit card company deposits $10 into my bank account. That $10 is new money that did not exist anywhere until you clicked submit on the web form.

So what is the value in something that can too easily be created and destroyed?

[TimG]

So what is the value in something that can too easily be created and destroyed?

That is why they call it a fiat currency. It has the value that people believe it to have.

[dre]

I don't have time to dissect and unravel this nonsense.

Thats because you cant refute a single thing I said. Your posts are packed full of not only oversimplification and half truths, but also glaring errors. Nobody can blame you for sidestepping debate when they are pointed out to you.

[TimG]

Thats because you cant refute a single thing I said.

There is nothing to refute. Half of what you said agrees with everything I said. They rest simply shows a complete lack of understanding of why central banks do the thinks they do. None of it refutes the basic point: the money supply is created by free market choices and the central bank uses interest rates to influence those choices. The one new detail which you will likely harp on are things like "quantitative easing" where the central bank increases the money supply directly through the large scale purchase of government bonds but the context you are missing is such efforts are things that are not supposed be done in a properly managed fiat currency system. Edited February 27, 2014 by TimG

[dre]

There is nothing to refute. Half of what you said agrees with everything I said.

No you suggested that center banks set interest rates for consumer. Thats just flat out false. Its also false to suggest that its market driven, because banks and brokerages are actually market makers. They can inject as much money into the economy as they want any time they choose. They can create demand by relaxing lending standards, or introducing products that hide the real cost of borrowing, or they can lend 400 thousand dollars to an unemployed person. They can also backstop the creation of new credit by buying derivitives full of mortgages, credit card debt etc, which allows lenders to move risky loans off their book. This is all based on central banking and government policy. Not to mention, a lot of the demand for credit is generated by the government itself, and by local, state, and municiple governments. And with tools like QE, the central bank can simply make new money, and purchase assets with it, or the can dole it out to anyone they want... companies, other banks etc. They can do whatever they want with the money supply regardless of consumer demand, this is not government by any magical "free market". In fact when demand for credit is low (like during a recession) money creation normally INCREASES.

Edited February 27, 2014 by dre

[TimG]

No you suggested that center banks set interest rates for consumer.

That is not what I said.

Its also false to suggest that its market driven, because banks and brokerages are actually market makers.

Crap from conspiracy websites. Banks compete for business like any other business. There is less competition for soda pop than for banking services.

And with tools like QE, the central bank can simply make new money, and purchase assets with it

If they buy anything is it generally government bonds. But some central banks have bought stocks. If they do that is a sign of desperation because the economy is in real trouble. It is not something that is done in normal circumstances. Outside of that they don't buy assets.

The point you are missing is central banks want the money supply to increase based on free market decisions because that is the healthy way for it to happen. If they start engaging in direct intervention it is because their existing tools have failed to spur the desired free market based expansion.

Edited February 27, 2014 by TimG