Fedcoin Rising?

giulioprisco writes US economists are considering a government-sponsored digital currency. On February 3, David Andolfatto, Vice President of the Federal Reserve Bank of St. Louis, wrote a blog post based on a presentation he gave at the International Workshop on P2P Financial Systems 2015 [YouTube video]. The title of the blog post is "Fedcoin: On the Desirability of a Government Cryptocurrency."

Comments

Of course

[Anonymous Coward]

So they have a system that allows you to pass around *coins as if they were US dollars (the exchange rate is pegged) but all the transactions are digitally tracked in real time? Fuck yeah the feds want that!

Re:Of course

[amiga3D]

Not only that but with a click of a mouse they can confiscate all your money. It'll be like you never had it at all.

Re:Of course

[BarbaraHudson]

Unfortunately this is such a bad, outdated idea that the government will probably go for it.

We already have digital currency - those bits that record our current balances, etc in our bank accounts, etc. It's not like the bank takes physical money and moves it from one drawer to the other, or that when you pay with a credit card that the credit card company sends the merchant a wad of cash and some coins.

Re:Of course

[Mr.CRC]

To the government, "it's not your money."

Ha!

[digsbo]

It's ironic: The existence of a completely untrustable cryptocurrency will dramatically improve the credibility of more trustworthy cryptocurrencies.

Re:Ha!

[Anonymous Coward]

If a currency didn't have inflation then their wouldn't be economic growth, just rent seeking from those luck to be born with money. get over it.

Re:Ha!

[sir1real]

Neither inflation nor deflation favors investment. Inflation does however favor borrowing whereas deflation encourages savings to finance capital investment. You don't understand how real people behave. It's a very rare oddball who keeps money under the mattress or buries it in the backyard. It's true that deflation increases the value of your money but investment does not preclude deflationary gains so why not get both?

Also Paul Krugman and Milton Friedman do not represent the entire gamut of economic thought anymore than Hilary Clinton and Mitt Romney represent the gamut of political thought. Krugman and Friedman are both apologists for the state and they both hold the same basic Keynesian assumptions about the economy.

"Only an absolute idiot -- someone who doesn't have the slightest idea of how the money works -- would argue that inflation is bad."

Don't piss on my leg and tell me it's raining. Inflation favors the political class and the bankers while screwing the rest of us, especially poor people who already have a hard enough time getting by without having their purchasing power diminished.

Re:Ha!

[david_thornley]

With inflation, I don't want to keep my money sitting there doing nothing, because it will lose value. Most of my non-material wealth is in owning things that aren't really money, like stocks and bonds, and hence I'm investing. If the dollar inflates, the dollar value of my stock goes up.

With deflation, owning things is risky, and keeping money under the mattress just increases its value. If deflation is 2%/year, any investment I make has to earn 2%/year in constant dollars to just stay even with my mattress, in contrast with inflation, where a 0% return in constant dollars beats my mattress.

Therefore, somebody wanting me to invest money has to make a considerably better case during deflation than inflation.

Brought to you by the same government

[MikeRT]

That arbitrarily seizes cash left and right because it is deposited in "structured deposits" to avoid a policy requiring the transaction information be logged in a government database. I'm sure this will be a real hit--with the IRS.

Re:Brought to you by the same government

[XxtraLarGe]

That arbitrarily seizes cash left and right because it is deposited in "structured deposits"

What are you, some sort of kook? That never happens!

Re:Brought to you by the same government

[medv4380]

I read your linked articles and I have little sympathy for the paranoid people who structure deposits in the belief they are avoiding taxes. To quote the first of your linked articles.

All of the money came from paychecks, he said, but he worried that when he deposited it in a bank, he would be forced to pay taxes on the money again. So he asked the bank teller what to do.

The teller was wrong, and should be fired, for telling him about how to avoid the reporting, and I don't have sympathy for anyone who's intention was to circumvent the law even if they wouldn't have had to pay taxes on it anyways.

Re:Brought to you by the same government

[witherstaff]

The government has shown they are perfectly happy seizing any asset they can get their grubby hands on. You don't even need to have been charged with a crime with forfeiture laws getting hundreds of millions of dollars. They'd take your cash and fedcoin. http://www.washingtonpost.com/sf/investigative/2014/09/06/stop-and-seize/?hpid=z3

Re:No privacy at all

[amiga3D]

If you don't have anything to hide you shouldn't need to worry. Big Brother is just looking at...I mean out for you.

Not surprised

[bjdevil66]

If this actually replaced hard currency and became a widely accepted standard, the government would eventually introduce legislation to ban the usage of all non-government cryptocurrencies. I'm not sure what the argument will be ("we can't afford it anymore", "terrorists used cash to commit atrocity X", etc.) but it would fit in with the model of our current system (the dollar is the only legal, federal U.S. currency).

Also, from the article: Understanding this, it is unlikely that Fedcoin will be the preferred vehicle to finance illegal activities. -- This would cast an unfair, "guilty until proven innocent" suspicion upon anyone wishing to still use cash. And there's no way in hell I'd trust the government to not abuse the privacy issues. They wouldn't be able to control themselves with that info...

Re:Not surprised

[bill_mcgonigle]

I'm not sure what the argument will be

Same as for the current fiat currency - "we need to be able to print an unlimited amount of digital currency, but if anybody else does so it's counterfeiting, and your labor* is the collateral for paying back debts against creditors while we give away value to our politically connected friends. Because otherwise terrorists and child pornographers and Muslims."

A primary feature of the currently popular digital currencies is that the politicians can't manipulate it, and so the politicians will never propose one with those features - for the US, holding the world reserve currency is the source of a majority of its power vs. other nations, and it's how political favors are handed out at home (e.g. bankrupting the savings and loan system to benefit the 401(k) regime, driving money out of community savings and investment (stifling bank loans to new businesses, etc.) to benefit Wall Street and the big-box multinational political donors). The money gradient between concentrated and diffuse interests is what powers DC, and currency manipulation is what enables it.

* your labor, your children's labor, your grandchildren's labor, etc.

I hereby declare...

[istartedi]

I hereby declare the number 90185349087539845793845389573985739485739487593857893 in the name of the King of Spain. What will you give me for that?

Re:I hereby declare...

[JustNiz]

I bid .0000001 btcoin.

Re:Guy is a moron.

[Anonymous Coward]

1. This is fuckin dumb. Just dumb. High School Econ that nose picking morons need to graduate with a D average tells you that taxing commerce gives the government incentive to encourage commerce.

2. Nobody is suggesting that this would be an un-trackable currency. The long running joke that is bitcoin is proof enough of what happens when you can effectively execute transactions that have zero consequences. (No bitcoin isnt private, but the dozens and dozens of quickly folding scam- err.. exchanges is proof that its private enough)

3. Take off the tin foil hat.

I would be interested in something like FedCoin because I like my above-the-board transactions to have security.

Bitcoin true believers are always so shocked to see that they quickly attract the same scam artists and thieves that turn up when those "stifling regulations" are removed. Ponzi schemes. Investment scams. All the classic shit that's been around since the concept of currency itself was created.

Re:Guy is a moron.

[Anonymous Coward]

> The one and ONLY value of a cryptocurrency is that it can be reliably traded secretly. There is simply NO other reason to use one.

1) Bitcoin is in no way secret. The blockchain (record of all transactions) is public.

2) There are many other values of cryptocurrency... the main one is that you can conduct electronic transactions (over distance, etc) via P2P transfers (without a middleman taking a cut).

Re:Yeah!

[westlake]

Now we're going to have a government-backed currency with a central bank that can control interest rates! Anyone can exchange it at will! Of course, the institutions that monitor these transactions are going to have to follow a set of regulations, and probably have some sort of government-backed insurance for deposits...

You say this like it is a bad thing.

Re:No privacy at all

[suutar]

at least with bitcoin the user ID is not definitively linked with a particular human. Everyone can see what transactions were performed, but knowing who was involved is not as certain. Do you think a government sponsored currency will have even that much anonymity?

Re:Guy is a moron.

[slashmydots]

Wrong! Bitcoins' top appeal is:
- you can use it if you're under 18
- you can use it if the world bank hates your country
- you can use it to accept payments without paying a credit card gateway company a ton of money
- you can use it to take orders over the phone if your credit card processor thinks you're too young of a business to take card-not-present transactions
- it is virtually impossible to use a stolen wallet if the user encrypted it

And it most certainly, absolutely, is not "secret." It's is the polar opposite. It's all logged.

Re:Guy is a moron.

[oodaloop]

The one and ONLY value of a cryptocurrency is that it can be reliably traded secretly. There is simply NO other reason to use one.

Cyrptocurrencies also ensure there are no forgeries. If a bill is printed with the hash on it, it can be verified easily. This is actually an excellent use of the cryptocurrency standards. Having the govt, as well as citizens and businesses, being able to track it publicly would be a benefit. Also, you're a moron.

What if apples were oranges

[random coward]

This whole article seems to be a discussion of "if apples where oranges."

He goes off the rails right from the beginning with his definition of money. He says money cannot be a store of value; when in fact that is one of the most important properties of money. It is from there were he misses why bitcoin is taking off somewhat. He should know this as he points out it is deflationary and thus a good store of value. So he completely misses why it is cryptographic, and why that matters. Talks about the fed controlling the exchange on the one hand yet talks of mining or the fed mining on the other, so he obviously doesn't understand that the mining is the how of the supply of bitcoin, nor that the idea of bitcoins is to work without a trusted third party, which he puts back in as the FED.

Without that cryptographic underpinning that is impossible if the FED controls supply what is left? The fed distributes signed serial numbers that they generate with their special random number generator? And at any time they could release a near infinite supply of them and crash the market. Think of the possibility to perfectly counterfeit FEDCOIN if someone hacked the FED's key!

This would surprise me if the FED actually did this. Not even they are this stupid.

Re:No privacy at all

[kuzb]

...until someone asks for your name and makes the connection. It's not a very big jump to go from one to the other.