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Bitcoin Currency Surpasses 20 National Currencies In Total Value
Velcroman1 writes "More than $1 billion worth of bitcoins now circulate on the web – an amount that exceeds the value of the entire currency stock of small countries like Liberia, Bhutan, and 18 other countries. Bitcoin is in high demand right now — each bitcoin currently sells for more than $90 U.S. — which bitcoin insiders say is because of world events that have shaken confidence in government-issued currencies. 'Because of what's going on in Cyprus and Europe, people are trying to pull their money out of banks there,' said Tony Gallippi, the CEO BitPay.com, which enables businesses to easily accept bitcoins as payment. 'So they buy gold, they put it under the mattress, or they buy bitcoin,' Gallippi said."
time to cash in
It's not a bubble! Push the price higher, higher, higher!
Or like has been stated before it's mostly being hoarded. (like when collecting anything, mostly of value to the collector and other collectors but not anyone else)
So, how do you "short sell" Bitcoin? I'd like to make a few bucks from this ridiculous bubble when it pops.
Bitcoin is probably safer than Cyprus banks.
Slow down, cowboy! It has been 4 hours since you last posted. You must wait another few hours.
It means that ALL bitcoins are collectively worth more than ALL currency of the 20 countries listed. They're not comparing individual currency units.
They probably surpassed North Korea with their first nickel.
A feeling of having made the same mistake before: Deja Foobar
How long til the web is full of ad banners mining bitcoins?
The article should say that more than 1 billion dollars in bitcoins theoretically exists on the web. Given the horrific problems that a few bitcoin exchanges have had in the recent past, I think some skepticism is warranted. My prediction is that sometime in the upcoming years some kind of attack nobody foresaw will happen on bitcoins and the attackers will get wealthy and the bitcoin holders will be left holding dust or bitcoins will simply be another bubble that collapses. I don't see a bright future for bitcoins.
Oh, you're right. That is quite serious then.
Just a bit of Humor in good fun! "Bitcoin Miners Threaten Strike Over Fed Regulations!"
With paper money, you can, but it's not very soft and absorbent.
“He’s not deformed, he’s just drunk!”
Myself being a multi-trillionare (in Zimbabwean dollars), I'd like to comment that it may not be hard to surpass some currencies.
If we colonize Mars, it won't be the World Wide Web anymore. UWW?
Cyprus has set a €300 withdrawal limit per day for their banks, to tame a bit the money escaping.
And when that happens you'll all wish you bought 1000 coins for a few cent. Now look at you all rushing to pay $100 per coin. By this time next year it will be $1000 per coin. A year later it will be $5000. Then 6 months later it could be $20,000, then $100,000, etc.
So how does this compare to the value of the worlds tulip bulbs?
If you wait for it to pop this time you'll miss out. It will never be $2 a coin again. In fact it's going to reach $1000 a coin by the end of the year.
I have some experience with both cryptography and decentralized systems of this kind. Which doesn't make me an expert. But I know enough to ask questions. I have had grave concerns about the validity of their design since I first read about it on slashdot some years back. It seemed to me the case had not been made that bitcoin was not vulnerable to rapid destruction of value, due to attacks on fundamental flaws in its design.
The thing that really surprised me was that people decided to try to use it anyway. But I guess our desires often cloud our judgment. As much as I would love a decentralized digital currency, I do not believe it yet exists. I wouldn't invest 90 cents in bitcoin.
Many currencies can appear to be stable until they're not.
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Such things always remind me of the exploration of the Americas, or at the simplified myth. In this story the English brought back potatoes and the spanish brought back gold. The question is who brought back wealth, and who brought back merely riches.
"She's a scientist and a lesbian. She's not going to let it slide." Orphan Black
Quote me. A year from now it will be approaching $1000 a coin. It will never be $17 a coin again.
Have you seen the actual numbers? Who owns the US national debt?
- China 8%
US gov't and pension funds 46,1%:
- The Federal reserve 11,3%
- Social Security fund 19%
- US households 6,6%
- State & local gov't 3,5%
- State, local pensions funds 2,2%
- Private pension funds 3,5%
http://www.businessinsider.com/who-owns-us-debt-2011-7?op=1
It getting to be a little much. Have you really got so much money invested in Bitcoin that you are willing to sacrifice /. to advertise it?
I've kind of been interested in the bitcoin thing and was actually mildly favorable but this is like....the fourth article on this this week and is so blatantly stupid I know now it is just a giant scam.
Enron's stock went up too. You might want to think about the fundamentals of what you're buying.
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Not sure you read the summary. Read it again. The $1 billion worth of Bitcoins is more the entire currency stock of several small countries.
But there seems to be this misunderstanding that China can just "call in" the loans. They can't. US securities are sold for fixed periods of time. They pay off on a given date, period. There is no ability to call them due early.
So all someone can do who wishes to cash out early is to sell them on the open market, and of course if you dump a ton of them the price will crash meaning you'll take a sizable loss on your investment.
People really need to go and look at how public debt in the US works before they chatter about it. Too many think it is the US going to China The Loan Shark and begging for money on any terms. Quite the opposite, it is China buying US securities (denominated in US dollars, held and tracked in the US exchange) when they are auctioned off.
Someone here does not understand deflation. Hint; it ain't me.
No, said it was. I see you still have not googled deflation.
How deep in the hole are you on these things?
Because of it's deflationary nature and lack of manipulation by government entities, I agree that it will continue to rise.... unless:
1. Somebody hacks the protocol, maybe with a quantum computer. If this happens, all Bitcoins will be instantly worthless and the price will plummet to nothing.
2. A major exchange gets hacked. If Mt. Gox got hacked and 50% of the world's Bitcoins were stolen all at once (or the cash that people were trading for them), you better believe there is no way it is reaching the numbers you are saying. Confidence would be shaken for a very long time.
I could go on, but it's certainly not fool-proof. There are several scenarios where it could be devalued instantly.
That said, I believe there is no better investment opportunity on the planet right now and if you can afford to risk a small amount of money, you should probably look into it.
Peter predicted that you would "deliberately forget" creation 2000 years ago...
quit comparing bitcoin to USD. We all know inflation on the dollar is crazy and trending toward never getting better. If you truly want to measure worth, compare the bitcoin to gold or oil. I have no doubt bitcoins could one day be worth $1000. I also have no doubt that a tank of gas could one day be worth $1000.
Slashdot needs to provide a way that would allow us to hide stories based on some word or phrase in the title.
I might even pay real money if I never had to see a "BitCoin" story show up on Slashdot ever again.
(Posted AC because I've already moderated in this thread)
It's only worth what people are willing to pay for it.
If confidence goes, so does the value.
No sig today...
Gee elucido; after seeing you post how bitcoins will increase 10x by 2014 in three posts now I can see that you selflessly want us all to partake in this great opportunity. I think I'll go and get some now!
// MD_Update(&m,buf,j);
Hey, I acknowledged my mistake quite before this post. I don't see the need for pointless hostility.
Not sure you read the summary. Read it again. The $1 billion worth of Bitcoins is more the entire currency stock of several small countries.
I did re-read it, look at my post from 24 minutes prior to yours.
I seriously hope nobody takes financial advice from you.
A witty saying proves you are wittier than the next guy.
Depends what was in more demand? Spanish could always grow crops and fruit due to the Mediterranean climate. England and Ireland could have years without a Summer, with no harvest and food.
Vintage computer adverts: http://www.vintageadbrowser.com/computers-and-software-ads
I read the Nakamoto paper. Here are my concerns.
The system is secure as long as honest nodes collectively control more CPU power than any cooperating group of attacker nodes, or so it is hoped. But pervasive communications are also assumed so that chain length can be measured, for the CPU-power argument to be possible to begin with. Consider how many key elements in the protocol require extensive communication, for instance to determine chain length. Between botnets, transparent proxies, ASICs, domestic and foreign powers with extensive eavesdropping, intercept, and computational resources... who by the way might be rather put out at having their currencies threatened... do you really want to trust any hard earned cash to this system? Or... if it is easy to make or get bitcoins without hard work, how much can they really be worth?
Meanwhile, is it anonymous, or has this massively transparent electronic P2P currency been designed to keep a particularly difficult to erase record of every transaction completed with it? From the paper:
Some linking is still unavoidable with multi-input transactions, which necessarily reveal that their inputs were owned by the same owner. The risk is that if the owner of a key is revealed, linking could reveal other transactions that belonged to the same owner.
...aaaaaaand, the section ends. So good luck, silk-road purchasers.
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It's price is driven entirely by human emotion just like the stock market, so it can pop and collapse just the same. Watch what happens to it if people start losing faith in it. As its value grows, so does the interest it will garner from hackers. A couple of bad hacking stories can destroy the value pretty damn fast.
Are agnostics skeptical of unicorns too?
...and, by the way, the argument about bubbles holds for currencies, stocks, bonds, commodities, real property, or anything you can exchange. So saying "it isn't stock" misses the point being made.
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$1 billion "dollars" "worth" of bitcoins now circulate
Fixed that for ya.
I think his point is that down the road, potatoes did more for the English than gold did for Spain. Spain's situation as of now speaks for itself compared to that of the Commonwealth...
Nothing is enough for whom enough is too little - Confucius
A currency's significance can't be understood by the size of the money supply alone. USD-equivalent volumes of bitcoin transactions is probably a better measure.
because when it comes down to it, the value is the same, as it is for the toy money I made as a kid. there is no backing, and who's behind it?
if this is supposed to be a new economy, how come they still want my old fashioned money?
The European Union is adamant about maintaining countries and people in the Euro project, they prevented countries from switching back to their own currencies and instead did bad plans like bailouts... Do you really think they will allow the use of Bitcoin on such a scale? You're mental.
Change is certain; progress is not obligatory.
Can you get one billion dollars dollars from an automatic teller machine machine?
Either you're holding a bunch of bitcoins and trying to boost their value, or you are a sucker.
As soon as you think that a bubble can't pop, you get in and stay in longer than you should. Bitcoins, like any other currency, only have value when people are willing to exchange something for them. A piece of paper saying "One Dollar" has no inherent value, only a social value, as many Bitcoin fans correctly point out. Their mistake is thinking that a chunk of bits valued at "One Bitcoin" have any inherent value either.
Some big-ticket assets that have inherent value include:
- Land
- Houses
- A rail car's worth of feed corn
- Cattle
You get the idea. It's either something you can directly use, or something you can use to make something else you can use.
I am officially gone from
That is a place where you see that level of volatility. Something that can be worth a ton one week, down a bunch the next, back up, back down, etc. Also has daily volatility like one. If you compare the charts to a thinly traded stock, it looks much more like that than a currency.
It's a scarce resource. People can't create them easily.
OTOH the value is completely arbitrary, just like a stock price. It can go down as well as up.
No sig today...
Do remember the Internet has a long and perfect memory of claims you make.
It means that ALL bitcoins are collectively worth more than ALL currency of the 20 countries listed. They're not comparing individual currency units.
But that's equally meaningless! All the UD$ in circulation (the M0) is both small and basically meaningless when talking about the money supply. The money supply relevant to anything includes fractional reserve banking (or zero-reserve banking in the US!), which is where governments manipulate the money supply in the 20th century. These days even more ridiculous means are used.
If the US switched to bitcoins as its currency, very little would change. The government would still be destroying the value of money just as fast - "the government printing money" is a metaphor, for goodness sake.
Socialism: a lie told by totalitarians and believed by fools.
The IRS considers Bitcoin an good not a currency.
You got a citation for that? I'm pretty sure the IRS will consider it a negotiable instrument which is not a good. And yes I am an accountant.
It isn't income until/unless you sell it and realize a profit.
Properly stated until you sell it, it is an unrealized gain and typically is not taxed, though there are some special cases.
is that anyone can create it. If someone figures out a way to create them much faster than today; or some government decides it wants to create some uncertainty in the market by flooding the market regardless of cost of production the value will drop. there is no "full faith and credit" backing its value and will ing to act to proptect its value; in that respect it's more like a stock or freely traded commodity.
I'm a consultant - I convert gibberish into cash-flow.
No. What would you need anonymous internet currency for....use your imagination. Bitcoin is completely supported by illegal activities and speculation.
You can also burn it to keep warm in the winter.
https://en.bitcoin.it/wiki/Trade
Contents
1 Getting started
1.1 Free Samples and Offers
2 Currency exchanges
2.1 Real-time Trading
2.2 Fixed rate
2.3 Bulk/Large-sized Trades
2.4 Gift/Debit Cards
2.5 Precious & Base Metals/Coins
2.6 Local/In-Hand Exchanges
3 Financial
3.1 Lending
3.2 Equities
3.3 Options
3.4 Futures
3.5 Forex
3.6 Interest on Bitcoin
4 Bitcoin eWallets
4.1 Bitcoin Banking and Ewallets
5 Bitcoin payment systems
5.1 Escrow
6 Internet & Mobile services
6.1 Bitcoin-related
6.2 Connectivity
6.3 Design
6.3.1 Creative
6.3.2 Web
6.3.3 Art
6.4 Web Hosting
6.5 Dedicated/Virtual Server Hosting
6.6 Domain Name and DNS Hosting
6.7 Email
6.8 VoIP/SMS
6.9 Security Services
6.10 Mobile App Development
6.11 Productivity
6.12 Other
7 Online products
7.1 Search Engines
7.2 Cloud Providers and Services
7.3 Software
7.4 Education-related Software
7.5 Gambling
7.6 Games
7.7 Graphic design
7.8 File sharing
7.9 Music
7.10 Virtual Art
7.11 Digital Downloads
7.12 Entertainment/Books/Magazines
7.13 Social Media/Aggregators
7.14 Cyber Begging
Yup, the key thing here isn't really how much they are worth. The key thing is that people see them as worth something and thus will give you things for them. It doesn't matter if the price drops in a crash because short of some fundamental technical flaw invalidating the entire bitcoin system, people aren't likely to ever value them at 0 again.
The inflationary economic hypothesis has functioned on a large scale for a few decades. The entire world had a successful deflationary economy for several thousand years before that.
Traditionally fiat and inflation was something a broke government did to finance something it couldn't afford like a war. A system that is designed to make spending beyond your means feasible doesn't seem like a sound fiscal system to me.
But hey, to each his own. But stop pretending that inflation being taught as economics 101 now actually makes the hypothesis proven, tested, or correct.
Trade drives deflation/inflation not the other way around.
gov't printing money is not a metaphor. gov't prints money daily, to replace old money. They also print money at times to deal with inflation.
If the US switched to bitcoins, an enormous amount of things would change, immediately. Among other things you would see the entire country destabilize quickly.
Bitcoin is an open source currency invented by nerds. It definitely qualifies as news for nerds. The billion dollar mark is a legitimate point of note so this definitely qualifies as news for nerds.
Personally, I have no interest in stories about games. Just because you aren't interested in a topic doesn't mean none of us are.
gov't printing money is not a metaphor. gov't prints money daily, to replace old money. They also print money at times to deal with inflation.
Yes to the first (but it's meaningless), no to the second. The amount of physical currency in circulation is just meaningless these days: it's less than 10% of US money supply even if you just look at the M2, not the M3.
What that means is: if everyone tried to withdraw their checking and sub-100K savings/CD deposits in cash, that would require 10x more physical currency than actually exists, far more if you include large deposits.
The physical currency just isn't that important. Just as there are no bill serial numbers associated with the money in your bank account, there wouldn't be any specific bitcoins associated with the value of your savings account. Morbo says money does not work that way.
Socialism: a lie told by totalitarians and believed by fools.
From the article:
Bitcoin watchers and financial experts aren't as convinced. While the two events may be happening simultaneously, there is little, if any, hard evidence to suggest that one event is fueling the other.
Maybe someone needs a refresher in "correlation does not imply causation"?
'The tyrant will always find pretext for his tyranny.' - Aesop's Fables
And then the Irish lost all the potatoes and the British stole all the gold from the Spanish via piracy!!!
Waterfox - a Firefox fork with legacy extension support, security updates and better privacy by default.
New posts don't appear without refreshing the page. It's likely he loaded the page, and before he got to your comment and replied you had submitted your post acknowledging your mistake.
Apparently wizard is not a legitimate career path, so I chose programmer instead.
the Spanish gold had EULAs?
> gov't printing money is not a metaphor. gov't prints money daily, to replace old money. They also print money at times to deal with inflation.
gov't printing money is not a metaphor. gov't prints money daily, to replace old money. They also print money at times to cause inflation.
or try Glenn Beck's paranoid ranting... and selling gold during the commercials on Fox "News"
i really hope someone at slashdot is getting a kickback for the pumping going on here
for the rest of you: time your sell right!
intellectual property law is philosophically incoherent. it is your moral duty to ignore it or sabotage it
I'm afraid you're at least somewhat wrong. Gov't bonds are solid investments that have a low, but reliable return.
If you're worried about preserving your wealth, but still need a return to fund your pension payouts, gov't bonds are a "safe" bet in many countries around the world. That's the type of debt Social Security, state and local gov't, pension funds own. The debt is real, the interest payments are real and they have to issue new bonds every year.
A government bond is a bond issued by a national government, generally promising to pay a certain amount (the face value) on a certain date, as well as periodic interest payments. Bonds are debt investments whereby an investor loans a certain amount of money, for a certain amount of time, with a certain interest rate, to a company or country.
Just as there are no bill serial numbers associated with the money in your bank account, there wouldn't be any specific bitcoins associated with the value of your savings account.
Why would anyone keep their bitcoins in a savings account controlled by someone else? The whole point is that you have control over your own money. With cash there is a major convenience factor in leaving your money at a bank (figuratively speaking) since you can't sent cash over the Internet and carrying large amounts around with you can be hazardous to your health. Bitcoin can be transferred peer-to-peer to anywhere in the world in a matter of minutes, and, assuming your wallet is encrypted with a decent passphrase, physical theft is not a significant risk. For electronic security there is offline "cold storage" and multi-factor authentication.
There is room in the Bitcoin system for interest-bearing accounts, but no one is compelled to use them just to participate in the financial network. Moreover, Bitcoin's manipulation-resistant design means that simply holding your bitcoins in your own private wallet is an investment in the entire Bitcoin economy—the broadest of all possible index funds—which pays interest in the form of rising purchasing power (deflation). As a rule, banks don't pay interest which exceeds the average rate of return on the market (even for CDs), and any account which did would clearly be an investment, with the risk that you may lose some or all of your principal.
All that aside, deposits are only part of the story. What really gives banks the freedom to implement fractional reserves is their role as payment processors. That's what lets them transfer balances between accounts, particularly between different banks, without ever converting those balances back into real currency. Bitcoin eliminates the need for separate payment processors, and if the banks aren't handling payments internally, they'll need significantly higher reserves on hand to deal with the day-to-day demand for the actual bitcoins expected by other banks and entities outside the banking network.
"The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
Obviously there is a bitcoin bubble. It is high time to start selling insurance packages against bitcoin crack. Then resell the insurance within complex financial products and wait for the world to collapse again.
https://bitcointalk.org/index.php?topic=48521.0
From 2011.
As best I can tell 35.5% of all bitcoins have already been minted. These 7,473,950 coins are all property of existing bitcoin users. There seem to be about 41,280 registered members of this site. I'll be generous and say there are ten times as many bitcoin users as there are members. That means about 410,280 bitcoin owners with on average 18 BTC each. Clearly BTC ownership is more concentrated than this, but lets be egalitarian for the moment.
If we pretended all bitcoin owners were all Americans that is about 0.13% of the population. It's not of course. Bitcoin is intended to be a world currency. So 0.0068% of the world population own 100% of all current and at least 35.5% of all possible bitcoins.
The view on this forum is that the world will come to their senses, throw out fiat currencies and move to something rational like Bitcoin. This of course means 6,000,000,000 people basically begging to use a resource owned by a relative handful of people. Say we just minted up the remaining 13,526,050 BTC and scattered them to late adopters purely out of the kindness in our hearts. That means about 0.00225 BTC for each of them to use in rebuilding their economy. Sure 18 BTC on average doesn't make us feel very rich. But it is 8,000 times what everyone else would have if we stopped competitive minting today.
But we won't stop competing of course. Sometime around Pearl Harbor Day of next year Bitcoin will hit the 50% distributed mark.
----
By that day, how many active Bitcoin users and daily goods trades do there need to be to make a sustainable Bitcoin economy viable?
----
Because to potential new adopters, after that point Bitcoin is going to look like a new a 21,000,000 coin currency with a 10,500,000 coin pre-generation that went to the creator and his "friends". Certainly people will stop caring about Bitcoin long before they show up on our doorsteps with signs saying,
"We are the 99.9932%!"
You are not entitled to your opinion. You are entitled to your informed opinion. -- Harlan Ellison
Because we all know how valuable Beanie Babies were at their peak. There is no doubt in my mind that a rebound will come any day now...
M0 = physical currency.
M1 = M0 + checking accounts
M2 = M1 + savings and CDs, except large deposits
M3 = M2 + large deposits.
M0 < M1 << M2 < M3
There's an order-of-magnitude jump from the M1 to the M2.
Why would anyone keep their bitcoins in a savings account controlled by someone else? The whole point is that you have control over your own money. ... There is room in the Bitcoin system for interest-bearing accounts, but no one is compelled to use them just to participate in the financial network.
Why would anyone use a bitcoin exchange? But a checking account is about convenience, a savings account (or CD) is about interest. Much of modern economics is based on fractional reserve lending of the savings/CD account money, and that mechanism is the primary sizer of the money supply - that's why the M2 is so much larger than the M1.
Moreover, Bitcoin's manipulation-resistant design means that simply holding your bitcoins in your own private wallet is an investment in the entire Bitcoin economyâ"the broadest of all possible index fundsâ"which pays interest in the form of rising purchasing power (deflation).
Merely being inflation-resistant is a bad investment. Wealth is ownership of something that creates value (and thereby generates income). Bitcoins are not wealth.
All that aside, deposits are only part of the story. What really gives banks the freedom to implement fractional reserves is their role as payment processors.
Well, modern banking includes all sorts of crazy exploits, but the fundamental role of a bank is tied to savings/CDs, not checking (demand) accounts. Sure, bitcoin might eliminate the need for a checking account just to make transactions (though the apparent need for echanges makes me wonder). But that's orthogonal to soliciting people to loan money to the bank (savings/CDs), then loaning that money out at a higher interest rate (mortgages and business loans) at a profit. And that latter activity is most of the money supply - the physical currency is less than 10% - even if you include money in checking accounts (M1) it's only about 10%.
Socialism: a lie told by totalitarians and believed by fools.
I think the question is, are they circulating, or are they being hoarded? The answer is, people are buying them as a way to maintain their wealth.
Once bitcoins start being used to buy and sell things, instead of just to hold, we might see some interesting times. But just buying them (demand) creates just a bubble. Nothing interesting to see here, except maybe people losing everything once the bubble bursts.
But a checking account is about convenience, a savings account (or CD) is about interest.
In theory, perhaps, but can you point to a savings account or CD which actually pays positive interest after accounting for inflation? I certainly haven't been able to find any. Persistent inflation hides the fact that your accounts are really losing value over time. For a bitcoin bank to pay interest at all, its investments would have to outperform the market average, something most managed investment funds have trouble with.
Merely being inflation-resistant is a bad investment. Wealth is ownership of something that creates value (and thereby generates income). Bitcoins are not wealth.
I think "wealth" is the wrong term here, but I'll let that slide. The Bitcoin system can create value, in that it enables more efficient trade, but I agree that bitcoins are not capital goods in the traditional sense. They don't produce anything on their own. Where the investment aspect comes in is that holding bitcoins, like holding any currency, is an indication that you have produced value in the past and saved the proceeds rather than immediately consuming them. Now, you can choose to allocate your savings to a particular investment, which may perform better or worse than the market average, but even just holding them has the effect of decreasing the supply and thus making everyone else's bitcoins more valuable. In terms of purchasing power, that's the same as if you had loaned a portion of your savings out proportionally to everyone else holding bitcoins. Their capital investments, enabled by your saving, drive up the productivity of the entire economy, which increases the demand for—and value of—your bitcoins when you eventually do choose to spend them.
This is equally true for an inflationary currency, of course, but in that case you start out losing a fraction of your principle every year to the politically well-connected. The average rate of return you could expect to receive with a fixed currency supply is offset by the decrease in purchasing power due to inflation. The GDP goes up in real terms, but your fraction of it goes down because new money has been added to the system.
though the apparent need for echanges makes me wonder
The exchanges are just a ways to swap bitcoins and local currencies. They're only "necessary" to the extent that Bitcoin is still fairly young and not directly accepted everywhere. An economy based on Bitcoin as the primary currency, or even as one of several widely-supported currencies, would have much less need for foreign exchange; you could be payed in bitcoins, and spend bitcoins for goods and services, without ever converting to or from USD or otherwise requiring the services of an exchange.
"The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat
can you point to a savings account or CD which actually pays positive interest after accounting for inflation? I certainly haven't been able to find any.
It was common ~5 years ago, but it turns out that was overflow from the mortgage derivative mess. It does seem rare in modern times - and yet, there's all this money in savings and CDs. People want a safe place to park cash, and getting ~inflation returns is better than nothing, I guess.
At any rate, the US could still move to bitcoins for currency without the Fed losing any of its power to screw up the money supply, since that is a factor of fractional reserve banking, not of the number of actual units of currency in circulation.
Where the investment aspect comes in is that holding bitcoins, like holding any currency
As a store of value, hoping you get out what you put in is one thing (and bitcoin isn't that yet, no track record). But hoping the value vs some other currency changes in your favor would certainly be speculation not investment.
but even just holding them has the effect of decreasing the supply and thus making everyone else's bitcoins more valuable. In terms of purchasing power, that's the same as if you had loaned a portion of your savings out proportionally to everyone else holding bitcoins. Their capital investments, enabled by your saving, drive up the productivity of the entire economy, which increases the demand forâ"and value ofâ"your bitcoins when you eventually do choose to spend them.
Deflation and people hoarding cash has the reverse effect, right? When no one will loan out their money (directly or otherwise), then no one can raise capital and the economy stagnates. I didn't think the negative effects of deflation were even controversial.
This is equally true for an inflationary currency, of course, but in that case you start out losing a fraction of your principle every year to the politically well-connected.
All systems ever invented by man have this property, and there's no evidence it can be otherwise. Limiting the quantity of corruption is an interesting discussion. Pretending that some new system won't have corruption is sophomoric.
The exchanges are just a ways to swap bitcoins and local currencies.
That's a fair point. And the great thing about bitcoin is that as yet there's a true free market for the cost of transaction processing with a vanishingly small transaction cost. I doubt that will survive the end of subsidies (when the last bitcoin is mined), but just the fact custom ASICs are there for mining means the transaction cost could stay very low - at least until some government finds the way to inject the everpresent corruption.
Socialism: a lie told by totalitarians and believed by fools.
People want a safe place to park cash, and getting ~inflation returns is better than nothing, I guess. ... At any rate, the US could still move to bitcoins for currency without the Fed losing any of its power to screw up the money supply, since that is a factor of fractional reserve banking, not of the number of actual units of currency in circulation.
You're missing the connection between these two points. Fractional reserve banking is enabled by the fact that people leave their money in savings accounts and CDs to avoid inflation. Without those long-term deposits the banks can't operate with low reserves, and without the inflation people won't leave their money on deposit. They'll either hold it themselves, or put it in a clearly-labeled investment fund knowing that any such investment can lose value.
But hoping the value vs some other currency changes in your favor would certainly be speculation not investment.
Agreed, but we're only talking about the purchasing power of currency in general here, not exchange rates between currencies. If the supply of currency in circulation is fixed, and the economy as a whole is growing, then currency must increase in purchasing power. That's simple supply and demand, not speculation. The same applies for a decrease in the currency supply and a static economy. In essence, when you look at the big picture, saving is investment.
When you put your money in an index fund, you're not really investing it into anything in particular. You're splitting it across the entire market. The only real difference between that and simply saving the money is that the index fund isn't directly affected by changes in the currency supply.
I didn't think the negative effects of deflation were even controversial.
The "negative effects" of deflation are a myth.
Deflation and people hoarding cash has the reverse effect, right? When no one will loan out their money (directly or otherwise), then no one can raise capital and the economy stagnates.
But people will loan out their money to an investment which provides a better-than-average return, i.e. one which offers a nominal ROI on top of the increase in purchasing power due to deflation. Making loans to below-average ventures is malinvestment and decreases economic growth. This is true even in an inflationary economy, but it's harder to single out the malinvestments when everyone is offering a positive (nominal) ROI.
Note that I'm not saying that a decreasing currency supply is automatically a good thing. I'm saying that inflation and deflation are important price signals in their own right, and forcing either of them by manipulating the supply of currency sends false signals and results in malinvestment. We don't need more currency, or less currency; the absolute amount is irrelevant. What we need is a constant supply against which everything else can be measured.
This is equally true for an inflationary currency, of course, but in that case you start out losing a fraction of your principle every year to the politically well-connected.
All systems ever invented by man have this property, and there's no evidence it can be otherwise. Limiting the quantity of corruption is an interesting discussion. Pretending that some new system won't have corruption is sophomoric.
Corruption in general is off-topic. Inflation necessarily rewards the issuing authorities, and by extension those closely connected to them; it doesn't take a corrupt issuing authority to distort the economy. The very act of diluting the money supply with new money which does not correspond to past productivity does that all on its own, and no matter how evenly one tries to distribute the new money there will always be winners and losers. In practice they don't even try t
"The state is that great fiction by which everyone tries to live at the expense of everyone else." - Bastiat