Greek Financial Crisis Is an Opportunity For Bitcoin

An anonymous reader writes: Greece's economy has been in trouble for several years, now, and a major vote next weekend will shake it up even further. The country can't pay its debts, and the upcoming referendum will decide whether they face increased austerity measures or start the process of exiting the Euro. One side effect of the crisis is that alternative currencies like Bitcoin suddenly look much more attractive as the "normal" currencies become unstable. "Tony Gallippi, the co-founder of bitcoin payment processor Bitpay, tweeted on Sunday night that he expected the price of bitcoin to rise to between $610 and $1,250 if Greece exits the Euro. The currency is currently worth $250. Part of the reason why the crisis is so tempting for proponents of the cryptocurrency is the echoes of a previous crisis in the Eurozone: the banking collapse in Cyprus in 2013, which saw that nation also impose capital controls to prevent massive outflows of currency from the panicking country. That collapse came at the same time as the first major boom in the price of bitcoin, which began the year at less than $20 and peaked at ten times that by early April – before it all came crashing down."

Comments

Go away, Tony

[Anonymous Coward]

"Tony Gallippi, the co-founder of bitcoin payment processor Bitpay, tweeted on Sunday night that he expected the price of bitcoin to rise to between $610 and $1,250 if Greece exits the Euro. "

In hopes of getting everyone to quickly buy Bitcoins so it actually rises and he can sell. Nice try.

You think Greeks want MORE electronic money?

[xxxJonBoyxxx]

>> alternative currencies like Bitcoin suddenly look much more attractive

The problem most Greeks suddenly face is that their money is now locked up as electronic balances in banks that have shut down for a week and won't let them have more than 60 euros at a time. After crises like this (even America's own "great recession"), people tend to prefer forms of money are more than just bits or fiat paper, such as gold and silver.

Re:You think Greeks want MORE electronic money?

[MightyMartian]

Because the value of gold and silver is somehow less arbitrary than electronic bank balances.

bit coin doesn't solve the strategic issue.

[nimbius]

The greek financial crisis was brought on by a neoliberal government that promised the moon and stars, never collected tax, and drove itself into bankruptcy by securing loans (some predatory) that it could never repay. 23 years of national economic policy are coming home to roost, much as they did in the united states during the housing collapse, except the frameworks are radically different.

Greeks aren't generally accustomed to paying tax. Free medical and social services, some wildly more generous than the average western nation, are normatives they enjoy, and expect to enjoy regardless of income. shifting greece from a two decade model of tax evasion to even moderate tax reform will be met with cars burning in the streets because the average greek voter isn't privy to the fact that the government, in order to remain popular and in power, basically spent itself into oblivion.

exiting the euro may be the cure. Greece seems to be a country that doesn't consider capitalism in the western sense. theyve shunned the world bank strategies of privatized education and water. Evergrowing GDP. endless investment, and cloistered monied elite don't necessarily factor into the countries priorities. It will be a hard road for greece because many other nations will be very reticent to trade after an exit, but it will also afford numerous opportunities for local industry to emerge and thrive.

Re:bit coin doesn't solve the strategic issue.

[neilo_1701D]

Exiting the Euro gives them some control over their destiny.

A country that is in such poor economic shape generally has it's currency devalued. This has two effects: first, imports are suddenly more expensive; and second exports are suddenly cheaper for the rest of the world to buy. As the economic mess cleans up, you have a capital inflow into the country, liquidity frees up and things get better.

Now Greece (or any other country in the EU): They don't have their own currency; they use the EU's. So they can't allow their currency to devalue; they are dragged along by the strength of the German economy, which effectively determines the value of the Euro. They can't control their economic destiny.

Exiting the Euro may be the only option to give the Greek economy exactly what it needs: a savage, sharp recession to flush out all the inefficiencies and get back to making stuff and exporting it. Or just producing enough for domestic consumption; that'll do. Staying in the EU probably means that it's going to be a long, drawn-out and painful process.

Re:bit coin doesn't solve the strategic issue.

[Errol backfiring]

What would exiting the Euro actually accomplish?

A lot. First of all, the money system could be in the hands of society instead of the other way around, as it is now. This could change the very definition of money for the Greeks.

The current situation in Europe is that all the nations are under control of the European Central Bank. NOT the other way around, as the ECB is an independent institution. This independent institution however has the power to grab as much money from the nations as they want (through the "stability pact"). Even so, it is just a bank, but with the right to print money.

Now you all know how fiat money is made, right? You have to give (well, promise) a valuable thing to the bank (the "security"), the bank puts in in the books, says "hey, we have an extra amount of money in the books!" and "lends" it out to you. I put the word "lends" between quotes, because it is not lent, but created by this bookkeping fraud. The money never existed before the loan. Off course, holding their laugh, the bank says that they are doing something risky by lending your own value out to you, so they ask usury. In Newspeak: interest. So, basically, you pay the bank to hijack your security.

There is off course a downside to this piramid scheme: the usury that you have to pay extra has never existed and can only be generated by new loans! At some point you are lending so much to pay the usury (thus bringing more and more valuable items to the bank as security!), that loads get refused, and you will have to default or plunder even more resources to give away to the bank. That is where Greece is right now. The Greeks have nothing to loose, as they have been plundered to the bone already.

Now what would happen if society itself (represented by the goverment for example) could issue money? In that case money could become "effort for the greater good of society" instead of "bottomless debt to an independent company". The government could pay "made up" money to people building roads, providing healthcare, etc. That money can then circulate further within society. The difference would not be that the money is made up (it is made up now also), but that money would actually get a real value. Off course, the goverment can always "unmake up" the money with taxes. But hey, taxes can be much lower. Instead of requiring high taxes in bank-debt to pay to road-building companies and to repay it and more to the ECB, the money can become its own tax! You pay in effort to society instead of in bank debt to the bank!

Off course there is a catch: everything depends on how wise the amount of money is chosen to be paid to society. Too little, and society will issue its own currency (and pay in sigarettes, for example). Too much, and nobody will believe the numbers. Vary too fast, and the money will be unreliable. I really wish the Greek goverment a lot of wisdom.

As an aside, if the government prints the money, they can set the rules as well. A ban on usury ("interest"), for example. Or a ban on speculation that is no more than a gambling game. Or even negative interest (some local currencies feature this) to encourage people to keep the money circulating.

All in all, getting control over their own money is the best (and I think the only) option left to Greece.

Re:bit coin doesn't solve the strategic issue.

[hjf]

It would allow Greece to freely print money as it needs. Thus, trading "debt" for "inflation".

This is what Argentina did back in 2001. We had our money at a fixed rate of 1 USD = 1 Peso. The country could only have as many pesos as we had dollars in the central bank.

In 2002 we exited this scheme and made the Peso a floating currency. This allows the government to print as much money as they need to pay public employees and local suppliers.

Is it a good solution? Yes BUT temporarily. You can live with inflation for a few years if you do things right, and use that opportunity wisely. Create industry, lay off government workers, and basically allow things to take their course.

The problem is that Argentina has been abusing this for 12 years now. Instead of getting rid of government workers, they're taking more. They're also nationalizing railways and airlines (Aerolineas Argentinas operates at a loss of $1M a day). Instead of incentives for new jobs, they're giving away money to unemployed in "social plans".

Reading the comments about Greeks I'm guessing they will do exactly what we did: Exit the euro, devaluate, cover salaries by printing more money. Take the unemployed into government jobs. Forbid utilities from increasing their price (but giving them "subsidies"). In 3 or 4 years Greece will be a FINE place to live. You'll see a lot of expensive cars in the streets, lots of new buildings, overall support for the government. The president will be re-elected with an overwhelming majority. And in 10 to 15 years Greece will be struggling again. How do I know? Because as an Argentinian, this is what i live with every day.

Let's Get This Off Our Chests First, Then Discuss

[Tokolosh]

Ponzi
Scam
MtGox
Not backed by anything
No "Full faith and credit"
Can't pay taxes
Money Laundering
Drugs
Silk Road
DPR
>50%
Gold
Executive Order 6102

Ok, now that is out of the way, we are ready to discuss the issue at hand.

Yeah, I'm sure that's the answer

[cdrudge]

...he expected the price of bitcoin to rise to between $610 and $1,250 if Greece exits the Euro. The currency is currently worth $250.

I know when my country is looking at economic collapse I'd look to move all my money into a currency that's going to double-quintuple in value nearly overnight. That's the stability I want and look for. Plus think of the literally 2 or 3 actual real retailer in the country that even know what a bitcoin is, let alone accept it for payments that I'll be able to spend my new found wealth

Austerity or...

[alex67500]

The country can't pay its debts, and the upcoming referendum will decide whether they face increased austerity measures or start the process of exiting the Euro and face even worse austerity.

FTFY.

Leaving the Euro will mean that the country has defaulted, and whatever currency they put in place will have no value at all. The government will be bankrupt and will not be able to pay civil servants or pensioners. There are only 3 ways this goes:
- Creditors accept to write-off some of the debt. They cut their losses and allow Grece to survive, in a situation which is actually bearable.
- More austerity, from inside the euro. Hard times ahead.
- Default. Chaos, Civil War.

Humanity and Finance don't go together very well...

Attractive compared to what?

[sjbe]

One side effect of the crisis is that alternative currencies like Bitcoin suddenly look much more attractive as the "normal" currencies become unstable.

Bitcoin will not be more stable or attractive than other currencies including the dollar or probably even the euro except in some weird corner cases. If someone is putting money into bitcoin because they think it is even relatively stable then they are an idiot. If someone wants to use bitcoin to transfer money then there is a relatively small risk there but you'd have to be pretty dumb to just buy and hold bitcoins for any substantial length of time. Even if Greece does exit the Euro it isn't going to make bitcoin meaningfully more sensible than it already is. If someone wants to swap currencies to hedge against currency fluctuations I can think of a huge number of options I'd consider long before bitcoin for that purpose.

Tony Gallippi, the co-founder of bitcoin payment processor Bitpay, tweeted on Sunday night that he expected the price of bitcoin to rise to between $610 and $1,250 if Greece exits the Euro. The currency is currently worth $250.

I rest my case. If it can go up that fast then it can (and probably will) go down just as fast. Bitcoin is not a place anyone should be comfortable keeping their money for long unless they are speculating.

Re:What an opportunity!

[cheesybagel]

Yeah. Actually Bitcoin is a terrible idea. To replace one deflationary currency they can't print (Euro) for another (Bitcoin).

No my dear friend. It's fiat currency they need right now.

Re:Stability

[Junta]

Not to mention that 1Y ago it was $650 per unit, and was almost $1000 a year before that.

So on top of a massive inflation over two years, they are saying they are so stable they predict a 200-300% deflation thanks to how awesomely stable it is...

I don't understand how anyone can testify to the stability of bitcoin with a straight face.

Re: Because the Greeks are so stupid?

[Anonymous Coward]

fiat currencies are a ponzi scheme.

Re:Because the Greeks are so stupid?

[Spazmania]

Right. The article makes no sense. The Euro isn't collapsing, Greece and its banks are. If you have the Euros with which to buy bitcoins, you're better off keeping the Euros. Just don't deposit them in a Greek bank.

Those outside of Greece will have an impact

[davidwr]

When the first country leaves the Eurozone, then it will make it easier for the next country in crisis to do the same.

This will cause those in weaker countries to look to something other than the Euro to store their long-term savings in. Bitcoin will be one of many options, as will metals, other major world currencies, land, art, collectables, and other items that are likely to keep their "real value" in the event this person's country exits the Euro and all bank accounts are re-denominated into a weaker-than-the-Euro currency.

Re:Those outside of Greece will have an impact

[NotDrWho]

There is no such thing as a magic currency that any country can use to turn worthless promises into something of value. Well, maybe the dollar, but only if you're the U.S.

The fact is that Greece can leave the Euro and print all the money it wants. But that money is going to be as worthless as the paper it's printed on and everyone will know it. No one is going to accept it for anything of value. And no one is going to loan them anything of value. So they'll be like Germany in the early 1920's, with piles of worthless paper money and a black-market/barter economy.

At the end of the day, you just can't keep spending more than you take in. It's going to collapse at some point. Greece is one of the most notorious countries at doing this, and so they're the canary in the coal mine. But the same thing is going to follow for the U.S. and many other European countries if they don't find a way to balance their budgets. Eventually the credit card bill comes due and the creditors just won't loan you any more money.

Also the Euro is stable and widely accepted

[Sycraft-fu]

Trying to push bitcoin only shows that the author has a poor understanding and an agenda. While you could, potentially, argue bitcoin in cases where a country's currency has collapsed, or is unable to be used to buy things from other countries. Bitcoin is highly volatile, a very poor store of wealth, but it is something you can spend and transfer, in some places at least, and at present it has value.

Well, that isn't an issue with the Euro. It is an extremely important and widely used currency, second only to the US Dollar. All Eurozone countries use it (by definition) which is quite a few major economies. As such it is also widely sought after in international currency exchanges. Euros are very easy to spend on the international scale. Many places will take them directly, and any bank will convert them.

Also the Euro is pretty stable. When you look at it compared to other major currencies like the Dollar, Pound, and the Yen it compares very well. All fluctuate, of course, but not very quickly. So it is a good store of value, you don't have to worry about losing your money. Works long term too, as many nations with good credit will sell debt instruments in Euros.

So there is nothing bitcoin solves here, because bitcoin is a currency and currency isn't the problem in Greece. This isn't Zimbawbe where the currency was worth nothing.

The only way it could "help" is to move money out in the event of capital controls on Greek banks. But of course:

1) You have to get the money out of the bank first, which a capital control can slow down.
2) The only way it facilitates that would be being less traceable. As I said, Euros are taken everywhere, you can convert them to Dollars or anything else.
3) Most importantly that wouldn't help the situation at all, it'd make it work. Might help an individual save money, but it would only worsen the situation.

Replying to myself

[davidwr]

Anyone who uses something as volatile as Bitcoin as a long-term store of value only has themselves to blame when things go south.

For me, personally, Bitcoin's primary utility is as a medium of exchange, not as a store of value. Thanks to Bitcoin-based and similar low-friction (read: low transaction fee) means of exchange, I can buy stuff from merchants that accept BC without dealing with typical currency-conversion fees. If I'm a seller, I can sell without dealing with the typical merchant fees associated with credit cards. Then again, I have the advantage that my nation uses a currency that is, for the time being at least, considered one of the world's major stable currencies.

Re:What an opportunity!

[DocSavage64109]

You should trust trustworthy algorithms, not just all algorithms. Bitcoin in particular is a pyramid scheme algorithm.

Re:What an opportunity!

[kurkosdr]

Using Bitcoin to trade doesn't make any more sense than using Google or Apple stocks to trade (with the difference that Google and Apple stocks fluctuate less rapidly in value). Oh, and the state-controlled water companies and the mostly state-controlled electricity company of Greece () accept payment only in Euros. And the special tax on all fuels (heating diesel, vehicle diesel, gasoline, LPG and CNG), which is seperate from VAT, is paid in Euro only, so gas stations have to charge in Euro. Even in if everyone else decides to sell you stuff Bitcoin, you still have to use Euros to live. BTW, if a country's currency become worthless (like a new Drachma will be), people typically use US dollars (see Zimbabwe), not obscure libertarian cryptocurrencies. Sorry.

Pump and dump

[linuxguy]

Not long ago, value of Bitcoin was around $1200. Now it is around $250.

Anyone buying Bitcoin for stability is too stupid. Anyone suggesting that the value of Bitcoin is about to rise to $600 or $1200 is attempting to pump the price in order to dump their holdings.

Re:What an opportunity!

[fustakrakich]

Such nonsense. Austerity is not 'reform'. It is larceny.