Elon Musk: Bitcoin Structure is Brilliant, But Has Its Cons; Paper Money is Going Away (ark-invest.com)

Elon Musk, who among other things, is a pioneer in the payments industry, has weighed in on one of the most divisive topics in finance today: Bitcoin. In a podcast with Cathie Wood of ARK Invest, Musk, the co-founder and chief executive of electric car maker Tesla, was asked to "go off topic" and offer up some thoughts on the most famous cryptocurrency. From a report: "I think the bitcoin structure is quite brilliant. But I'm not sure that it would be a good use of Tesla's resources to get involved in crypto," he told Wood. Musk, who founded PayPal, added that the days of paper money are numbered and digital currencies could offer a more efficient solution to shifting value. "Paper money is going away and crypto is a far better way to transfer value than pieces of paper, that's for sure, but it has its pros and cons," he said.

Comments

Physical money will never go away

[Larry Lightbulb]

If he means money made of paper, then he's probably right, but wrong otherwise. There's plenty of people who don't, won't, or can't have a credit card and more who wouldn't have a personal computing device to do their daily transactions with.

Re:Physical money will never go away

[fahrbot-bot]

If he means money made of paper, then he's probably right, but wrong otherwise.

Case in point, the Bank of England now uses polymer banknotes for their current £5 and £10 denominations and will use that for higher ones in 2020. Many other countries have done the same for their currencies. Polymer notes are (reportedly) cleaner and stronger (allowing them to last longer) and safer (can incorporate more security features).

Re:Physical money will never go away

[Shaitan]

No, it would be about making everyone account for all their money.

The problem is that the people who are hiding their money tend to be the poor. A handyman is a good example, these people don't make all that much money, what they do make is on a cash basis and they usually pay taxes on little or none of that money. This is what makes it possible for you to hire someone on craigslist who comes and installs an appliance for a reasonable rate. There isn't much tax to be gained here.

The people who are dodging significant amounts of tax that are worth pursuing are doing it legally. The biggest dodges are dodging income entirely. There are several ways to do that, real estate is a good one, just reinvest the proceeds or if you own a boatload of stock in a company only sell what you need and give a chunk to charity or to pay a debt to avoid paying tax on it. The stock you gave away counts as money spent but only stock you cash in and dividends count as income.

Re:Physical money will never go away

[Shaitan]

Troll lol. I guess there are few rich tech beasts with mod points.

If you want to see an example of how the dodge income scam the rich play works just refer to the taxes Warren Buffet helpfully revealed. I'll fudge the numbers because I'm too lazy to look, the concept and rough scale is right. His actual gains were billions but he only directly cashed out maybe 20 mill and dodged almost all the tax on that giving another chunk to charity. For the most part he is able to invest in new companies, make acquisitions, etc by using stock to do it. Hell, he could pay everyone down to his lawn service in stock for all I know and they'd be crazy not to take it as the stock has a good return and appreciates over time unlike cash which depreciates with inflation.

This is the loophole which needs closed, these are the tax dodgers we need to go after. Leave the handyman alone, if he does well his business will grow and he won't be able to hide his few thousand a year from the IRS anymore. For the most part small independent business people like the handyman turn out to have a sense of ethics and want to bring it above board as soon as they have enough going on for it to be worthwhile anyway. That is why the IRS doesn't expend many resources tilting at that windmill.

Re:Physical money will never go away

[thegarbz]

England? Now? Australia introduced those as a complete set for general circulation 27 years ago https://en.wikipedia.org/wiki/...

Holy shit I'm getting old. I remember that.

Re:Physical money will never go away

[Enigma2175]

An even better example is Donald Trump. In 1995, he claimed a loss of $916 million on his personal tax return. But he didn't lose a billion dollars. His company didn't even lose a billion dollars. The banks that lent him the money that he lost on his horrible property deals were the ones that realized the loss. From TFA:

Investors, for example, can walk away from a property and record the investment as a loss — even if they were playing with borrowed money. While a profit from that same property would be treated as a capital gain, losses are treated as “operating losses” under a tax code provision that dates back to the Great Depression. Those losses can be deployed far more flexibly than capital losses to shield other income from taxation.

“He was forced to sell many of his investments in the early 1990s, at pennies on the dollar, teetering on bankruptcy,” Edward Kleinbard, a tax expert at the University of Southern California, said of Mr. Trump. “There were real economic losses from those investments — borne entirely by the lenders. Yet nonetheless he was able to emerge with a large net operating loss to carry forward, attributable primarily to losing other people’s money.”

Not to mention the fact that any money that he acquired previous to that (mostly from his father) wasn't taxed either, partially by exploiting the current laws and in some cases just flaunting them to dodge taxes. Things like vastly understating the value of property that his father was transferring to Donald in order to avoid gift taxes, setting up sham corporations to funnel money to Donald and his siblings and getting paid large sums of money for "property management" services when Donald was just 3 years old. Some of the techniques were legal, some were of questionable legality and some were blatantly illegal. But rich people have armies of lawyers to besiege the IRS when anything is questioned so they rarely are held accountable even for the small fraction of tax frauds that are discovered.

And the whole reason that some of these tax schemes are legal is because the government is owned by the rich and powerful, they basically shape any tax legislation to their ends. Rich people have obscure methods for shielding their income from taxes because they wrote the laws that created those methods. It takes a hell of a lot of landscapers under reporting their income to equal the taxes dodged by one billionaire.

Paper money is not going away

[sjbe]

I think the bitcoin structure is quite brilliant.

The blockchain technology might be brilliant. Bitcoin very definitely is not. We shouldn't confuse the two. The jury is still out on blockchain but I think the more interesting uses of it won't be for currency. Bitcoin is an interesting but ultimately flawed experiment which might also be a pyramid scheme either intentionally or unintentionally.

Paper money is going away and crypto is a far better way to transfer value than pieces of paper, that's for sure, but it has its pros and cons

This is just idiotic. Paper money isn't going away any time soon and neither is fiat currency. Maybe in the far future but even then I doubt it. There is simply too much utility in paper money for a lot of transactions. Asking everyone to either carry an expensive computer with them or carry some means to interact securely with one in order to facilitate even the most basic transaction is unrealistic. Not everyone can get a credit card or afford a smartphone and even if they could it still wouldn't be practical some of the time.

If he actually thinks the dollar is trading bits of paper he has no idea what money actually is. (I doubt he's that naive) The vast majority of currency is nothing more than digits in a ledger somewhere. Paper currency is a tiny fraction of the total amount of money in circulation. Somewhere less than 10% of the total.

Re:Expert in something != Expert in the other thin

[Thelasko]

He has two bachelor's degrees. One in economics and one in physics. His experience with PayPal aside, Bitcoin is firmly within his areas of expertise.

Re:Forgets digital money relies...

[Comrade Ogilvy]

We are already past ten toes over that line. When there is a power outage most businesses shut down, because they cannot process credit cards. Many cannot even process cash.

Obviously much of this is still solvable with cash around. Supposedly.

Of course, this larger ominous question is why the banks were bailed out with the 2008 meltdown. Because if all the big banks were suddenly forced to file for bankruptcy, would the credit cards still work? Could you get gas and get to work? Can that gas station actually get gasoline delivered? Can your grocery store get restocked?

Once a business, say, a gasoline distributor, goes into bankruptcy, they cannot suddenly create a novel procedure to extend credit to the corner station without approval from a judge.

Wide swings in value is not a "con"

[xxxJonBoyxxx]

Wide swings in value is not a "con" - it's a non-starter for the general public. Ask the Weimar or anyone unfortunate enough to live in Venezuela.

Those folks are already getting debit cards

[rsilvergun]

shoved down their gullets. I know a few guys with fucked up finances and crap jobs. They don't get checks, they get money on a debit card every week or two.

It's sucks of course. There's fees and it's a major pain to use. But here's the rub: nobody really cares about these people. I mean, the current administration just rolled back a ton of consumer protection and anti-payday loan rules and nobody batted an eye. I only know about it because the crazy left wing sites I like complained about it (the kind that run articles on "The high cost of being poor".

TL;DR; If you're well enough off that you matter you're already getting away from cash because going to understaffed banks and waiting in line is a drag. If you're poor enough to depend on cash you're gonna get dragged into the cashless economy and taken advantage of by it, but nobody care.

Re:Those folks are already getting debit cards

[Anonymous Coward]

"Crazy left wing sites". The irony of it is that those sites would be moderate, fence sitters in any other country.

It isn't hard to wind up in that category. A former co-worker closed a bank account. A year later, some place hit the account with an ACH debit, and then the bank placed the co-worker on the Chex Systems blacklist. Even though the account was closed, that $25 for some yearly thing became $250 with all the fees the bank assessed. No word was sent to the co-worker by mail. He found out about it when his savings account was closed by the current bank.

The current US system has no protection for anyone but businesses. It is like the early 1900s, all over again, with hucksters and snake oil sellers everywhere, no laws to protect consumers, and step out of line, and the Pinkertons will end you. Only difference is that we have a recession-proof economy that only goes up and a stock market which is crashproof, so most people really don't care about this stuff.

Re:Thanks Rei

[Rei]

You know, I just had a heartwarming thought. I could drop dead tomorrow, and yet for years to come, people on Slashdot would be crediting any story that gets posted about Musk/Tesla to me. It's nice to know that people think about me when I'm not around :)