Everyone’s talking about BTCs, so I should probably throw in my two cents.
What is the purpose of an alternative currency?
Let me answer that by analogy. What is the purpose of the internet?
If you’re reading this, you use the internet to read the often unorganized thoughts of a person with strange views on all kinds of subjects. Undoubtedly, facilitating such reading is one function of the internet. In reality, however, the internet is just a way for people to watch porn.
Similarly, an alternative currency might be a cool way to create a better store-of-value – one that’s free from manipulation of central bankers and large banks. In reality, however, it’s just a way for people to break laws governing financial transactions.
If you want to move money around the world, pay people money, save money or invest money, you quickly find yourselves dealing with lots of regulations and controls.
Any alternative currency will be facilitating illegal transactions. As such a currency gets more well established, it will facilitate more illegal transactions. Eventually, regardless of how well established it gets, it will cross the line.
Could BTC be made to comply with such regulations? Probably, though I’m not entirely sure.
Will BTC be made to comply with such regulations? Almost certainly not. Even if there was someone who could organize this process (and was willing to pay for that process), it’s not clear that there’s any sizable market for an alternative currency that actually follows regulations regarding financial transactions.
Foseti 
If people simply wanted a store of purchasing power, they could buy futures contracts of the things they intent to consume. Obviously, this would be an overwhelmingly complicated task for most individuals, but a financial company could intermediate for a small management fee. I can flesh out how this would work more fully if you like. It’s also related to the logic behind NGDP targeting.
There isn’t a market for this, yet, because currency and bonds are supposed to accomplish the same things for you. If you trust them. When that trust disappears, companies that offer these services will probably emerge.
Also there’s the complication of taxes, which since they are based on nominal appreciation, don’t ordinarily let you get away even with mere preservation of fixed real value without calling it “capital gain”. Perhaps a clever financial-services tax lawyer could figure out a way around this – some kind of contract for direct barter exchange that shields the nominal appreciation – or something.
Also, there’s a lot of talk about how real estate is a “terrible investment”, but the thing about owning your own house is that you can live in it until you die – so it behaves like a fixed-purchasing-power annuity under your own control, which is very attractive to lots of people.
The point is that I agree with you (and Moldbug) on both counts. 1. BTC, because it is largely used to facilitate illegal activity, and could theoretically threaten the dollar, will be targeted by USG for elimination, and 2. BTC is not really about people merely trying to find a way to avoid fiat currency debasement, for which there are (or could be) non-anonymous alternatives.
There is an obsession amongst reactionaries to “get rich” of their reactionary knowledge. Why one wouldn’t simply join the Cathedral if one wanted to get rich is beyond me. My only guess is that reactionaries are made up largely of people that people who failed to join the Cathedral, and rather then hating it out of actual animus they just hate the fact that they are on the outside. I lump most secular reactionaries in this category (as what could motivate them beyond their own self advancement).
“Why one wouldn’t simply join the Cathedral if one wanted to get rich is beyond me.” — or perhaps this whole piece of mean-spirited amateur psychoanalysis is obvious bunk
Hitting a little close to home.
@ Asdf
Have you stopped beating your wife?
“My only guess is that reactionaries are made up largely of people that people who failed to join the Cathedral, and rather then hating it out of actual animus they just hate the fact that they are on the outside.”
Even if this were true, what difference would it make? The best way to view something is from outside its structure. Can you understand a planet if you cannot see the galaxy surrounding it?
Besides, most reactionaries were members of the Cathedral at one time or another. Many still are, but refuse to say anything about it, usually for economic reasons.
I don’t think anyone is “getting rich” here, you know?
What is the purpose of an alternative currency?
To find one that can literally change hands via the internet, i.e., change hands without the “have my bank talk to your bank” friction–2-5% overhead cost. This is to say nothing of the friction of “convert my gov’t issued currency into your gov’t issued currency”, which it happens to solve too.
Solving the double spending problem is bitcoin’s one (and only one) true innovation (an innovation that will probably be around when the sun burns out, btw). That it is a hard currency is a feature, but hardly novel. That it is beyond the control of any central bank is perhaps its most salient feature from the reactive perspective, but so is (at least mostly) gold. That it is kinda-sorta anonymous is kinda cool, but not nearly as anonymous as gov’t issued currency. Of course, when gov’ts start putting RF signatures in their currency, then alternative currencies could get a whole lot more popular.
It’s purpose was decidedly not to bring down the Cathedral, at least not the more popular parts of it. Hell most of the bitcoin fans are leftoid power-to-the-people, stick-it-to-the-man types–they just have no idea how sane (in the reactionary sense) it would be if politics no longer had any influence on the money supply.
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The “mostly” is interesting because it implies the well-studied ability to hoard, coordinate as a cartel, “corner the market”, and intervene in the precious commodity markets.
Why wouldn’t Central Banks treat BTC the same way they treat gold?
BTC is “Internet Gold”. It comes with all the internet benefits (anonymity, escape from legal requirements, free instant global transactions) and all the drawbacks (security), and also all the gold benefits (fixed supply) and drawbacks (Central Bank manipulation).
Why wouldn’t Central Banks treat BTC the same way they treat gold?
Because they’d have to buy BTC, which is classically what a currency does to make itself weaker. CHF -> Euro. It would drive BTC to the moon… no Alpha Centauri, because BTC has no central bank and no way to dilute quickly itself if it did. And that one balding, pot-bellied libertarian guy down in IT, I can just hear him now, “Fuck the Fed, I’m not selling unless they print me $1 trillion!” By then the game would long have been over… for the Fed.
The manipulation of gold I think, and I’m not up on ALL the conspiracy theories, has more to do with TBTF Banks (not CBs, although they are awfully AWFULLY cozy with each other) manipulating the futures markets and a questionable presence of actual physical.
“change hands without the “have my bank talk to your bank””
Yes, but the people that actually do this sort of thing on a regular basis, are probably breaking sort of law (which is why they’re doing this).
I agree with your analysis, but I think it just bolsters my point.
Yes, but the people that actually do this sort of thing on a regular basis, are probably breaking sort of law
By about the same amount of suspicion we would naturally have for any gov’t issue cash transaction. Cash is, in fact, much harder than bitcoin to trace. (At least until they start putting those thread width RF ID thingies in the money.)
But you cannot send cash, i.e., actual physical money, RF IDs or not, over the internet, and that is why the bank-to-bank “friction” has, up til just about now, always existed for internet vendors. Paypal is good (about 2%), bitcoin (or something very much like it) is better.
So I think you’re missing the point a bit. Can bitcoin be used for illegal transactions? Yes, but not nearly so well as gov’t issued physical cash.
Cash is indeed difficult to trace. Unless, of course, you have a lot of it. In which case, you can’t travel with it or deposit it anywhere without declaring it.
As I said we have few natural suspicions of folks doing business in cash… but I forgot to add: unless it happens to be above that magic ($10,000 ??) number. I suppose bitcoin might help with that.
There was a dude in Canada selling his house for bitcoins.
The thing about Bitcoin is that everyone arguing about it always bring it back the goals of Bitcoin–which are somewhat laudable, and somewhat not–but the problem with Bitcoin is not that it has the wrong goals, necessarily, but that it’s badly designed. Bitcoin is what happens when you get your monetary economics from computer scientists and science fiction writers. Bitcoins proponents should forget their knee-jerk antipathy to the financial system for a moment and learn instead from that characteristic institution of capitalist dynamism: the bank.
learn instead from that characteristic institution of capitalist dynamism: the bank.
Perhaps my irony detector is malfunctioning, Vimothy, but this is not even wrong.
Alas, no irony intended–perhaps you could explain?
“The bank”, as it is now exists as a government insured, too big to fail oligarchy with special borrowing rights from the Fed’s print shop so it can launder government debt, plays no role in capitalist dynamism. It is crony capitalism at best, and one of the worst frauds perpetrated on decent, hard-working citizens in the history of governments.
The sooner we can crash that model, the better.
Don’t even get me started… ooooh… now you’ve done it… this debt based economy, the dollar iss (is and only is) debt… and these banksters are just leeches… no that is an insult… to leeches for a real leech may yet have some therapeutic effect. In a sane world, one of them would get tarred and feathered once a month just as a prophylactic warning to the rest of them… but alas we have become so complacent. </rant>
Real capitalism involves the investment of capital, fully at risk, for a return on equity, and has nothing at all necessarily to do with type of currency in an economy. Sure, a holding company could be thought of as a type of bank, but not one in which grandma is going get auto-deposit for her SS check.
Geesh… the glory days of capitalism were more arguably ended by Central Banking… unless by “capitalism” you mean the ability of entrenched interests to use the political power to exclude competition.
Nick,
Just because “the bank” in its contemporary instantiation is flawed, doesn’t mean that “the bank” in its essence is flawed.
“this debt based economy, the dollar iss (is and only is) debt… and these banksters are just leeches… no that is an insult… to leeches”
I believe that capital-ism is necessarily debt based. What is it that distinguishes your criticism from the basic complaint (and indeed, mode) of communism?
I believe that capital-ism is necessarily debt based.
Bonds I guess? Well, even if that is correct, I still don’t see how that has much to do with the particular brand of currency people are putting at risk. In a world of nearly instant convertibility it should matter ever less.
What is it that distinguishes your criticism from the basic complaint (and indeed, mode) of communism?
The part where I’m advocating the removal centralized/state control, instead of advocating for (more of) it.
What you are saying, as far as I can tell, is that intermediaries are parasites, which is a criticism of capitalism as such, and I can’t see where else it can end apart from more state control. Borrowing and lending is a necessary condition and part of what capitalism fundamentally is.
What you are saying, as far as I can tell, is that intermediaries are parasites
No. I’m saying lending for private profits while simultaneously socializing risk is parasitic. In almost the exact same way that having taxpayers pick up the tab for your out-of-wedlock children is. Only about an order of magnitude or two more expensive.
Borrowing and lending is a necessary condition and part of what capitalism fundamentally is.
This is supremely debatable. Equity functions just as well for capitalism as debt. Arguably, the greatest days of capitalism functioned mostly on equity. But this, to me, is a tangential point. Even if bonds are ABSOLUTELY necessary for the functioning of capitalism, that still wouldn’t mean that banks are ABSOLUTELY necessary clearing houses for that debt. All you need is a functioning legal system where contracts are enforced… which is to say: civilization.
This is not necessarily accurate. Remember, there is a broad continuum that describes the nature of one’s financial claim or financial claim to an interest – everything from full ownership (with or without insurance) to being a remotely-indirect informal “stakeholder” in the underlying asset or activity (like the adult son who lives in the home of the man who works at the factory).
“Debt” and “Equity” are families of claims that describe formal sections of this continuum and contain within themselves highly diverse species – and the underlying legal rights characterizing those species, and the regime the law creates to deal with them, help to determine the value of the claims. And there is some overlap and convertibility too. If a “lease” requires that a replacement tenant be found before release, it’s not theoretically financially that different from an interest-only mortgage (though different laws will apply).
It’s complicated.
But the thing about this continuum of claims is that while the great variety of possibilities serves to “complete the market”, (which is theoretically “more efficient”) it is hardly necessary for the sake of policy if there are important trade-offs (which there are, for example, the stability of your economy / financial-system. Efficiency and Security are always at odds).
So, the law could notice that a certain species of “debt” (because of the illusion of absolute safety, especially “AAA”) is a potentially dangerous or unstable feature of the economic ecosystem and dictate that “only equity” be permitted. No one gets to “invest” while allowing themselves to believe they are “safe”, that is, without exposing themselves to the risks inherent in any real-world economic activity.
If it entirely possible to have “capitalism” run on an equity-only system – even for consumer credit. In fact, at bottom, it sort of is. After all – if there’s enough money to pay all the debts, there were profits and no problem, the interest is just like a priority dividend, but if there’s not, the debt gets destroyed or converted … into equity. “Great is bankruptcy!”
I’ll leave it as an exercise to figure out how all this relates to Monetary economics and the feasibility of various alternatives (digital or otherwise) to our current regime.
yeah… what handle said.
If it entirely possible to have “capitalism” run on an equity-only system – even for consumer credit.
In a system with no borrowing or lending, by definition consumer credit is not possible. Capital flows would constitute movements in equity claims, i.e., changes in the direct ownership of the fixed stock of assets, and nothing else. This is imaginable, much like communism is imaginable, but it isn’t really capitalism.
Vimothy, you back into not even wrong territory again.
What consumer credit was there in the Industrial Revolution and how (if it existed at all) and was it an indispensible part of capitalism?
Nick,
I didn’t say that consumer credit was an indespensible part of capitalism (though I would guess that it is)–what I said was that borrowing and lending are an essential part of capitalism. Since consumer credit is lending to consumers, if there is no borrowing and lending then there can be no consumer credit.
True. that’s what you said. I read more into it. Sorry…
Okay, so… how again are “banks”, not as the state run oligarchies of today but as absolutely free risk taking/risk spreading entities, so absolutely necessary to capitalism? Ignoring that fact that bitcoin would not put all banks (of either definition) out of business; assuming instead that somehow it did, how exactly will it prevent investors from investing in the equity OR DEBT of potentially productive enterprises?
And anyway there could be bitcoin banks. The various exchanges already sort of are. Bitpay is a bank of sorts. VC is entering the market. Some dude is putting up bitcoin ATMs…
I think, Vimothy, when I hear you say the libtards that created bitcoin designed it wrongly because they wanted to see banks die, I don’t think you have that right. Bitcoin’s designers and proponents (rightly, IMO) want to see the money supply decoupled from politics in toto. An economy that cannot run on (in theory) an absolutely fixed amount of (appropriately designed) money has something fundamentally wrong with it. And, whether this disposition is right or wrong, I think it is rather orthogonal to the question of healthy capitalism. In fact, capitalism and hard money go better together than not.
The mere fact that a type of currency makes some stride in efficiency, i.e., of trading over the internet more losslessly, will indeed take some business, a particularly soul-sucking business, away from banks. Too bad. Free market baby. Adapt. The lesser banks may die. The better ones live on and prosper. That’s sound really hyper capitalist. You should be happy!
I hope it works for these guys. I really do. But the more established it gets, the more it’ll be used for nefarious purposes. Success will be failure.
That’s where I think (or at least hope) you are wrong. Bitcoin (and/or currencies like it) solve one (and really only one) problem: How do you spend “cash” (actual, literal, verifiable property) on the internet without an intermediary and percentage-collecting agency?
Insofar, therefore, as it useful for nefarious means, it is equally useful for legitimate means. Already Bitpay’s March 2013 transaction volume exceeds that of (assumed, estimated on behalf of) Silk Road. So if and when (alas, probably when) US Treasury or Secret Service attempts to shut it down, they’ll have to look a lot of legitimate small business owners in the eye and say: “Too bad, suck it up, and pay your 2-4%.”
I’m not saying they won’t be willing to say it or spin it somehow, but at least we have some sad, salt-o-the-earth faces to put on the Propaganda Posters–a lot more sympathetic than Cesar the corner drug dealer.
> I lump most secular reactionaries in this category (as what could motivate them beyond their own self advancement).
Yeah there’s no other ideal or strong affect in life other than belief in a providential god. Come on son we’ve been over this a million times. I like you and I instantiate 6.2 negative utils when you play right into the hands of avowed Occimasochist Nick Land.
Wouldn’t an ‘Occimasochist’ chain themselves to the bridge in order to go down with a collapsing social order they despise? I think you mean something closer to ‘civilizational traitor’ or similar ethno-nationalist denunciation.
[…] BTCs from Foseti (slightly optimistic take on whether cryptocurrency’s will end up complying with future regulations) […]
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