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.

Re:You think Greeks want MORE electronic money?

[fatgraham]

I think his point was that you'd have physical access to it, yknow, to buy physical bread and milk.

Re:You think Greeks want MORE electronic money?

[FooAtWFU]

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

Depends on who's running the bank, doesn't it? The value of gold and silver fluctuate with supply and demand worldwide. They have industrial and decorative uses and a widespread base of people willing to own them. In the absence of large-scale deep-space asteroid mining technology flooding the market with excess supplies, they're going to remain fairly valuable.

A well-run bank can do much better (the value of its currency remaining approximately constant over time) but once you start instituting capital controls and swapping out the nice currency for shitty drachmas then it's another matter.

Re:You think Greeks want MORE electronic money?

[DarkOx]

That is only if it buys bread and milk. The trouble Greece and most of the modern world has is that its entirely dependent on international trade. Greece can't meet its needs by itself. I am not an expert on the Greek economy. Lets charitably assume they can feed themselves. What about all the drugs that are not manufactured there that many depend upon to live for example? Can a private individual order drugs from across the boarder with gold coins? Can a pharmacy or hospital buying in quantity for that matter?

Sure there are exchanges for gold abroad, ultimately the answer is yes; for some quantity of gold you can obtain enough Euro to buy what you need. Now if the banks are closed where you are that might mean sending someone abroad to physically execute these transactions where trading desks and banks are open.

If the economy becomes truly unhinged, people stop working, stores close, etc than gold really is not all that great. If I am hungry and you are hungry, and neither of us imagines that changing anytime soon do you think I'll trade my pound of cheese for your gold?

I am supportive of a gold standard in general because I think inflation and debt based currency is an insidious trap used to enslave all of us. A gold standard would prevent the vipers from manipulating things and causing recessions that last half of peoples productive lives, it would reduce inequality, it would reduce war, in exchange for more frequent smaller booms and busts. In short it would shrink many of the worlds problems. If you already have problems like Greece does it won't provide some magic fix, don't have any illusions about that.

Re: You think Greeks want MORE electronic money?

[Junta]

That's incorrect. Gold fluctuates pretty wildly with mass hysteria, compete with massive deflation and inflation. Much like bitcoin. Prior to the 20th century, when communication wasn't quite so instant and pervasive, gold did a pretty good job because it was rare for *everyone* to panic more or be more confident all at once.

Re:You think Greeks want MORE electronic money?

[mjtaylor24601]

I think his point was that you'd have physical access to it, yknow, to buy physical bread and milk.

Only if you kept it in a big pile in your basement, which would have its own set of security and logistical problems.

If on the other hand you keep you gold/silver in the vault of a bank that is now shut down for the week then you're right back to where you are now.

Re:You think Greeks want MORE electronic money?

[michelcolman]

Yes, you can. It's called derivatives. Sell silver you don't have, buy gold that nobody has, eat your heart out. They can send the price pretty much anywhere they like.

Re: You think Greeks want MORE electronic money?

[aNonnyMouseCowered]

Besides, gold has never been a good money substitute except for the very rich, and they probably already have their wealth stashed away some place abroad. Gold's value comes from having lots of it. If you want to buy a house having a few pounds could help you. But if you have just a few ounces of gold, how would you spend it? Shave it to buy a loaf of bread?

Re:You think Greeks want MORE electronic money?

[clovis]

I think his point was that you'd have physical access to it, yknow, to buy physical bread and milk.

What people found out in the Argentinian crisis of 1998 and in the breakup of Yugoslavia in the 1990's, is that you cannot buy anything you want with gold.
People want things that they can use (or must have), so the economy becomes barter - trade alcohol for cans of food, trade cigarette lighters for condoms, gasoline for alcohol.

I kind of doubt there will be a market for trading a can of soup for bitcoins on a street corner. I can imagine that someone might setup a trading warehouse that dealt with bitcoins, but I can't see that becoming standard practice. Keep in mind bitcoin trading requires computers and electricity.

What is gold good for? Gold is good for preserving your savings through bank failures and/or a currency crisis if you convert your savings before the crisis happens.
But you can do the same thing with Swiss francs or American Dollars, but like gold, only if you can get them before hand.
Banks love gold for themselves for that reason - to protect their own money.

Re: You think Greeks want MORE electronic money?

[FooAtWFU]

But if you have just a few ounces of gold, how would you spend it? Shave it to buy a loaf of bread?

You take it to a dealer and they "make change" buy turning it back into normal-person money. There are well-known gold coins out there of regulated weight and purity. For instance, the US mint has issued 1oz gold eagle and buffalo coins. They're in the neighborhood of ~$1300 and $1100 each right now, respectively. You can look up the price up on the Internet ahead of time and not get scammed by the dealer like you would with jewelry.

Re: You think Greeks want MORE electronic money?

[FooAtWFU]

Gold fluctuates pretty wildly with mass hysteria, compete with massive deflation and inflation. Much like bitcoin. Prior to the 20th century, when communication wasn't quite so instant and pervasive, gold did a pretty good job because it was rare for *everyone* to panic more or be more confident all at once.

Eh. Don't oversell the old gold standard. For starters, a gold standard was typically a steady and persistent malaise of deflation, as economic output increased more steadily than the money supply. Second, this was punctuated by Fun Fun Fun bouts of inflation when something like a gold rush happened or someone colonizing the new world discovered new mines overseas. Third, the metallic standards' troubles were amplified when regimes inevitably tried to do something stupid like have currency in both gold and silver with the price ratio fixed, invariably leading to a straightforward application of Gresham's law where the overvalued money drove out the good (sometimes merely hoarding the good money, other times trading it out of the country for a better deal).

Re: You think Greeks want MORE electronic money?

[Canth7]

Besides, gold has never been a good money substitute except for the very rich, and they probably already have their wealth stashed away some place abroad. Gold's value comes from having lots of it. If you want to buy a house having a few pounds could help you. But if you have just a few ounces of gold, how would you spend it? Shave it to buy a loaf of bread?

Exactly why the idea of a digital gold would be useful - no concerns about divisibility or spending it in places where you can't be physically present.

Re: You think Greeks want MORE electronic money?

[Solandri]

Eh. Don't oversell the old gold standard. For starters, a gold standard was typically a steady and persistent malaise of deflation, as economic output increased more steadily than the money supply.

Yeah, anyone advocating returning to the gold standard needs to read some economic history to really see what things were like when we were on the gold standard. 1800-1933 saw 33 recessions/depressions - every 4 years on average - with declines in business activity or GDP of 10%, 20%, and even 30% common.

Since going off the gold standard, we've had 13 recessions in 82 years, or every 6.3 years on average. And aside from the recessions following the Great Depression and WWII, none of them has seen GDP shrink by more than 5%.

Zero inflation/deflation in a currency happens when the amount of currency floating around exactly matches economic productivity. With a fiat currency, a legit government tries its best to expand the money supply to maintain that balance. With a gold standard, whether you get inflation or deflation depends entirely on the ratio of economic productivity to how much new gold is mined. And don't even get me started on how disastrous it is to set a finite limit on the amount of currency you can mine, like Bitcoin does.

Being on the gold standard doesn't mean you have solid monetary policy based on a physical good. It means your "policy" is effectively determined by how much gold people are finding and mining at any given time - its based on luck and good/bad fortune. Yes it prevents abuse by the government printing too much currency. But it avoids that potential abuse by completely removing the economy's rudder, leaving you adrift and completely at the mercy of how lucky gold miners are that year.

The true fundamental currency is productivity. Whether you use dollars, euros, gold, or bitcoin, avoiding inflation/deflation means increasing the supply of physical/virtual currency to exactly match increases in productivity.

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.

[Anonymous Coward]

The EU and the Eurozone are different. Countries can be (and many are) members of the EU without getting rid of their national currency.

Greece never even _really_ qualified for the Euro. They faked their paperwork and then apparently suffered amnesia and forgot that they were deeply in the poo, so rather than be very conservative and hope to ride the uplift from joining the Eurozone they spent like it was going out of fashion. Then the bills started to arrive. "Use those reliable tax receipts you've told us about" said the rest of Europe "Oh, we uh, we maybe overstated those, a bit, kind of". "OK, well I'm sure your rock solid exports will see you through" "Er, yeah, so, we have to come clean, we didn't tell you exactly how much of those exports existed only on paper". "So what do you have?" "We've got a lot of poor people. And debt. Help us out here?"

And so they're screwed. And they were always screwed. Every Greek who wasn't out protesting when their government built stuff it could never afford - but now is up in arms that their economy is in the toilet is as guilty as the people who actually signed the paperwork.

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]

What the hell are you talking about?
Argentina was in much worse shape than Greece in 2001. We restructured our debt (basically: screw you i ain't payin that). And guess what? We can get loans.

At a ridiculous >10% annual rate, while our neighbors get it for less than 3%.

But we can get loans. Never underestimate the greed of capitalists.

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

Stability

[Richard_at_work]

How is a jump from $250 per unit to between $610 and $1250 (an increase of between 244% and 500% against the dollar) any more stable than either the Euro (~15% fall over the Dollar during the past year or so), the GBP (~10% rise over the dollar during the past year or so).

Something doesn't make sense.

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:Stability

[Anonymous Coward]

No, you see, you are looking at it wrong. Bitcoin *is* stable, it's the other currencies that fluctuate wildly (yet almost perfectly synchronised with each other for some reason which probably has to do with them being fiat currencies).

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...

Re:Austerity or...

[phantomfive]

Greece needs to put as much effort and money as needed to put to an end to tax fraud, mainly from big fortunes as well as a stronger progressive tax law centered on direct taxes, not indirect like VAT as the IMF insists on doing. With only this, there will be no need to touch VAT, pensions, healthcare or education.

This is extremely optimistic. But your post helps me understand the Greek viewpoint. They are in for some hard times.

The vote is too late, it won't make any difference

[trybywrench]

They vote is too late, they will default. Yves Smith over at NakedCapitalism lays it out nicely.

"We described in detail how the referendum scheduled in Greece for next Sunday, July 5, is a cynical exercise in democracy theater. The Greek people are being asked to vote on a (draft) proposal by Greece’s lenders to unlock €7.2 billion in funds, the last portion of the so-called “second bailout” agreed by the Greek government in 2012. Tsipras knew at the time he announced the referendum that the proposal expired on June 30; that was the known-well-in-advance final date for the bailout terms to be agreed if each and every one of the 18 Eurozone countries agreed. We said it was a no-brainer that they would not agree; in Germany as with some of the other countries, it would require parliamentary approval to accommodate Greece’s too-late request, and there was no reason for any of them to cut Greece slack when the government has plenty of opportunity to schedule the vote in time, so it actually would inform the government’s actions.

Instead, Tsipras has already taken the decision to miss the €1.6 billion IMF payment due June 30 and the €3.5 billion ECB payment that falls on July 20, while falsely telling Greek citizens that they have a say in this momentous choice."

http://www.nakedcapitalism.com...

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:Clearly bitcoin is the answer

[ArcadeMan]

Bitcoin is nothing but a tax on stupid people.

If you had a choice between buying a one dollar lottery ticket every day or one dollar worth of Bitcoin, which would you chose?

Re: Because the Greeks are so stupid?

[Anonymous Coward]

fiat currencies are a ponzi scheme.

Gold will not solve this problem

[sjbe]

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.

They'd have a LOT bigger problem if there was a bank run. Then a lot of them would have access to none of their money. Of course they could keep their money outside of the banks but that's got its own set of problems.

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.

Really? Go take a few ounces of gold bullion to McDonalds and try to buy a burger with it and let me know what happens. Furthermore whether you have gold or fiat currency does not affect whether a bank run can occur. Bank runs happened long before the gold standard was eliminated. While it's not a bad idea to have some amount of gold as an asset it doesn't solve problems like the ones facing Greece and Greek citizens right now.

Re:Gold will not solve this problem

[Chalnoth]

Greece has had that massive bank run, to the point of closing banks and imposing capital controls. As the primary problem with exiting the Euro is that it would likely result in a massive bank run, I think they should probably default on their debt exit the Euro. The cost has already been paid. But exiting the Euro will give them the tools to recover.

Re: Because the Greeks are so stupid?

[Holi]

>Bitcoin is the world's first fringe currency.

pretty sure it's not.
There have been many fringe currencies. From company chits to Disney Dollars, there have been many fringe currencies throughout history, It's just that the term had yet to be coined.

Re:Forbes Magazine Article

[xxxJonBoyxxx]

>> he rich and the smart money left Greek a few months ago, and it is Joe Sixpack that is trapped and going to get shafted

Pretty much this, and there's been plenty of coverage for anyone who would listen, but I'll bet it wasn't on the evening TV news (or whatever "Joe Sixpack" consumes in Greece).

"New Greek bank run begins" (Feb 25)
http://www.naturalnews.com/048...

"'Slow motion' bank run continues" (June 17)
http://www.forbes.com/sites/ti...

"Banks impose a 3,000 Euro withdrawal cap" (June 22)
http://www.zerohedge.com/news/...

Why?

[fuzzyfuzzyfungus]

I realize that any instance of fiat currencies looking foolish is a happy day for the goldbugs, physical and virtual; but I'm not sure I follow:

Greece has been part of the euro zone for a while now, any remaining pre-euro currency is just a collector's item, and has no value now and no expectation of gaining value as the basis of a post-euro greek currency.

The euro itself will presumably do some fluctuating based on whether people are more nervous about the fact that the euro zone basically can't pull together when things look vaguely bad; or more enthusiastic about the fact that a weak member of the euro zone dropped out, leaving a stronger survivor group and establishing a precedent for (relatively) orderly drumming-out of any future weaklings.

In any case, greeks who currently have cash holdings either don't need bitcoins(if they just put the euros under their pillow they'll still be able to drive into the nearest euro zone country and spend them) or won't be helped by bitcoins(their euros are just numbers in the ledger of some deeply fucked bank that is imposing withdrawal limits or freezes, so they can't get them to hide under their pillow or to buy bitcoins).

A 'grexit' is actually more or less the opposite of the classic 'my holdings are in the dysfunctional currency of inflationistan; but capital controls are keeping me from expatriating them or buying dollars!' problem that bitcoin might actually be useful for addressing. If Greece drops out, all the greeks holding euros still have relatively hard currency, probably superior to whatever is introduced as a local replacement. They gain no obvious advantage from shifting euros into bitcoins, unless Greece bumps up their border controls into a veritable Berlin wall to prevent physical transport of currency; but continues to ignore online activity.

This story just seems orthogonal to bitcoins.

Not just e-money

[davidwr]

Commodity-backed money, such as actual precious metals or precious-metal-backed-depository-receipts (or even gold-backed bank notes) from an institution that people trust, can be functional currencies in places where the currency is unstable and local laws or customs don't prevent it.

Heck, even in the Untied States of America, the US Constitution specifically allows states to mind gold and silver coins and declare them legal tender. In practice, this is not needed because relative to the cost of most goods and services, the US dollar is at least as stable as gold and silver, and declaring gold and silver as "legal tender" while maintaining a floating exchange rate with the US dollar would mean merchants who took both would have to re-price things in real time to prevent arbitrage-buyers from disrupting the system. However, it the US Dollar ever has runaway inflation, the option for states to declare gold and silver legal tender would make the option of having "stable" prices in gold or silver and "adjusted-by-the-minute" prices in US Dollars attractive.

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: Bitcoin?! My God! They would be nuts!

[turbidostato]

"Thing is, the one who stole money is Greek government."

Yes. With the enthusiastic help of French and German governments and Goldman Sachs.

It is not that it's some kind of a secret but, still, I find amusing that the obvious fact that current Greek situation was a well planned trap of central/northen Europe and economical lobbies against south Europe economies doesn't gather but a fraction of mindshare than the "Greeks must pay" and "Greeks lived above their means".

Just some examples:
* Greek economical situation was falsified by Goldman Sachs, so Greece apparently reached the required levels to enter de EU and Euro currency. German government knew it (and even now, Mario Draghi, GS ex-consultant is current head of the European Central Bank). Still, I don't see anybody asking Goldman Sachs for billionary fines and compensations.
* Greece can't (partially) default its debts, not at least within the monetary union, still Greece hasn't still seen a dime of Germany's war compensations (I'm not even going into it's legal weight, but the obvious fact is that this helped to develop Germany's economy and now Greece is in a position to be returned the favour). Double standard anyone?
* Greece spends a quite above average percentage of its GDP on defense (at about 2.5% -a percentage significant enough as to put an end to Greece's crisis on its own), mostly on weapons bougth to... Germany and France, mainly to protect European interests on the zone. Do you know what Germany and France are *not* saying? They are not saying "return me back our planes and tanks, which are well above the level you need for self-defense, and so part of your debt gets settled".
* Most of the money lent to Greece isn't going to support Greek economy so it can go stronger, produce more taxes and return the debt but it is going back to Germany and other northern European countries and to support the Greek *private* banking system (again an example on the 'privatization of benefits but nationalization of loses', some "liberals" are so keen of). Even IMF concludes that no more than 11% of lends ended up being used to support the country's operations.

All this has not to be understood as if the Greek people voluntarily decided going that path (rising defense expenses to 2.5% of GDP, allowing Goldman Sachs to falsify the accounts, giving public contracts to cronies, etc.). This all was the result of a corrupt government with aquitance of (mainly) German government and banks, which are the same that now tear their robes in anger.

No, it was not that the Greeks were expending abover their means, it is that Germany -with the help of Greece's corrupt politicians, was robbing Greeks above their means and now Germany tries to hide their tracks just by shouting up loud.

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.

Athens has a printing press.

[monkeyxpress]

Interestingly, the National Bank of Greece is one of the eurozone institutions that has the facilities to print Euro bank notes.

Since November they have printed more than 13 billion euros of bank notes (against ELA funds) which Greeks are now storing under their mattresses.

One wonders what sorts of contingency the EU has for this. It would be the ultimate middle finger to the EU if Syriza decided to solve the ECB imposed liquidity crunch by literally firing up the printing presses, yet a uniquely convenient thing to do when stuck in a currency union. Normally, the ECB could punish them by cutting of access to the TARGET2 settlement system, but this is basically already the situation now with the ELA funds running dry and capital controls in place.

What a circus this could become.

Re:Athens has a printing press.

[monkeyxpress]

Perhaps, but making Greek euro notes non-legal tender would be a practical expulsion of the country from the eurozone, which may actually be what Syriza wants them to do. Draining 100 billion euros out of the ELA mechanism so that Greek retail deposits are secured, defaulting on the IMF loan repayments, and framing things so that Greece is the one getting kicked out by a nasty democracy hating EU would be a better way to exit than leaving in a huff. It would also solve Syriza's problem of not having a popular mandate to grexit, and rather oddly mean they wouldn't even have to deal with the practicalities of introducing their own currency - fixing the paper currency mess would be the EU's problem.

I see Greece is now challenging the ECB's legal right to cut of the ELA funding, and the ECB is saying the ATMs will run out of money within 5days. The issue of hard currency is definitely becoming the pressure point. Crazy times.

Why can Greece destroy the global economy?

[plopez]

I keep asking this question and no one seems to have a good answer. How can an economy as small as Greece's; or for that matter Italy's and Spain's; send global markets and economies as big as Germany and the US into a tailspin? There is somethings very wrong with our financial and economic policies. All this tight binding of economies and fifnacial systems seems to be a recipe for disaster.

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.

This makes no sense.

[edibobb]

If a Greek citizen can buy a bitcoin, the same person can buy Euros, Dollars, or stock index funds, all of which are more stable. The author of this must be either financially ignorant or hyping bitcoins.

Re: Because the Greeks are so stupid?

[sysrammer]

...It's just that the term had yet to be coined.

Well played.

Re:Greece has one huge industry: Tourism

[hodet]

As someone who has been to Greece I can say that they were very pleasant hosts and a wonderful people. I am not only talking about the ones working in the tourism industry. Regular citizens in general were very welcoming.

Re: Because the Greeks are so stupid?

[Muad'Dave]

Check out post-WWI German and Austrian Notgeld for one of the first 'fringe currencies' in general circulation.

I thought they only did cars?

[periklisv]

I'm all over FIAT's website but can't find any reference to currencies, I think I'll ask my local car dealer

Yeah? How hospitable were Tunisians?

[denzacar]

Whether Greece makes a "little" money on tourism or a "lot" of money on tourism is a function of how hospitable it is to visitors. If the country as a whole makes it a priority to be very nice and welcoming to foreigners, they stand to reap a lot more in tourist spending than if they take tourism for granted or, worse, go out of their way to make tourists feel unwelcome.

You can make the country hospitable up the wazoo, all it takes is ONE dickhead with an AK to fuck it all up.
Or one missing child.
Or a drowned one.
Or a rainy season.
Or a global economic crisis.
Or simply a fashion trend.

Tourism is a nice bonus and a source of foreign currency, but you can't run a country on tertiary sector alone - unless you are willing to be permanently in debt or permanently poor OR to end up exactly where Greece is now. Both poor and in debt.
Cause there is hardly a more literal way of signing off one's own economic security on "hope and prayer" than resting it on good graces of fickle foreigners bored with their everyday existence back home.

On top of it, to a small country, tourism is toxic.
It artificially raises the property value to unrealistic levels, prices skyrocket and it overflows the local services with people who don't pay for those services.
And you can't just tax them cause you don't want to scare them off or simply cause you can't properly charge for things like an increased burden on the environment or water supply.
Or police - which will inevitably become corrupt first time that either local or governmental coffers go empty and they either get told to "skin" the foreigners or to let them slide.
And corruption is again something that spreads across the entire society.

On top of that, it creates conditions where country's youth will spend their most productive years SERVING instead of studying.
And since the prices are up, when they age out of serving drinks to fat tourists, they won't have a home of their own, they won't have an education - so they end up unemployed.

Which is where Greece was going with their long term unemployment rising (with youth unemployment always staying lower while following a more jagged, seasonal, curve) until the introduction of the Euro brought it down - through heavy borrowing which provided money for make-work jobs.
People who were unemployed for decades got jobs. Yay!
Just before the shit hit the fan they were running the lowest long term unemployment in last two decades, while the wages kept going up.

As the debt kept climbing up as well.

Re:What an opportunity!

[ExekielS]

If I had modpoints I'd give you all of them. I've been screaming this for years but for some reason people are obsessed with horrible, ineffective, dangerous deflationary currencies.

Re:What an opportunity!

[Tyrannosaur]

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

Yes- but you can trust it to be a pyramid scheme algorithm.

Re:What an opportunity!

[FooAtWFU]

The historical evidence shows that Austerity causes demand contraction and often demand spiral, it has never in global history solved a budget crisis.

Austerity does cause demand contraction, but Greece is going to have to deal with it one way or another: there's no resources available for everyone to retire on a nice fat pension at age 55 anymore. It doesn't matter whether that comes out as a cut in euro-denominated pensions, or if that happens when people get drachma-denominated pensions: Greeks reliant on government funds must rely on less, because they're spending more than they take in, and it's pretty clear that lending money to Greece is less like lending and more like donating.

Now put a truckload of economic disruption on top of that mess.

The real way out for Greece was always securing a modicum of debt forgiveness and debt forbearance, plus enacting some economic reforms. The Greek economy is well-known as a sclerotic, over-regulated disaster area where you need to bribe corrupt bureaucrats to do anything and small-time rent-seeking plutocrats effectively own not just businesses but the right to operate important sectors of the economy. And the reforms were even going okay for a short while - real economic growth! - but the economic reforms proved unpopular with the leftists, and so this is what we get instead.

Glad it's not my country going through this.

Re:What an opportunity!

[fustakrakich]

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

Re:What an opportunity!

[IamTheRealMike]

Bitcoin is not actually deflationary. Its supply grows constantly until it eventually stabilises. The fact that Bitcoin prices have fallen a lot is more because lots of new people have discovered the project and decided they want some, but that effect will eventually peter out as Bitcoin becomes boring and everyone finalises their opinions of it.

Greece doesn't need fiat currency. What Greece needs is hard money – like the Euro (which is hard-ish, though not as hard as Bitcoin). This is because the Greek government is notoriously corrupt and the fact that they couldn't just print the pensions of their civil servants was one of the few things creating pressure to reform, and preventing outright pillaging of the savings of Greeks who do actually work in the private sector. Seeing Greece as one monolithic entity isn't right: there are different factions, not all of whom want the government to suddenly be able to spend whatever it wants. Hence the Greek people apparently voting for both keeping the Euro and not enacting any spending cutbacks, a contradictory position.

Ultimately Greece is going to get a lot poorer, no matter what. In many ways it's practically a third world country, one that was simply kept afloat by huge injections of foreign cash. But it never really stopped being third world in the way that it was run.

Bitcoin could, theoretically, benefit some Greek people now in the heat of the crisis because the Greek government wouldn't be able to impose capital controls on it. Thus preventing the outright theft of whatever little cash Greek's have left in the bank (sorry, I mean, solidarity tax/haircut/pick euphemism of choice). It is no magical cure for Greece's problems but it could tip the balance away from a government that discovered it was paying salaries and pensions for entirely non-existent departments, and towards people who are just trying to make a living.

Re:What an opportunity!

[oztiks]

Not being able to print Euros may of called for the collapse of Greece but under the Drachma Greece was already broken. Goldman Sachs committed fraud/trickery to get Greece into the EU in the first place. Therefore this has nothing to do with printing money or not printing money it has to do with "the real economy".

Printing money only camouflages the damage for a later day which is what they'll do to bail out Deutsche Bank to stave off an 09 type collapse this time around. Because at the end of the day someone somewhere will print money somehow to solve the problem.

Fiat has always resulted in these types of issues because they create debt based economies dictated by central banks. This is the very problem. One day people will see through the lie and all hell will break loose. This is enviable.

A gold standard may not be feasible but it is practical. Bitcoin has the same practicality but the question is, is it feasible? A tip, look into the actual mining process, learn about the sub types of bitcoin, then you'll see its value.

Re:Because the Greeks are so stupid?

[goose-incarnated]

Few currencies are backed by force.

Now you've got me curious - which currencies are *not* backed by force?

Re:What an opportunity!

[fustakrakich]

Yes, we are familiar with your 'vacation' house story. Just stop allowing rich people and your politicians to abuse the system. Stop the rest of the skimming at the top, and you'll come out alright. And just demand a raise if your taxes are too damned high, instead of complaining about people in need. The thing is, you are still under the Thatcher/Reagan influence, and it clouds your judgement.