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Why I want Bitcoin to die in a fire

Bitcoin just crashed 50% today, on news that the Chinese government has banned local exchanges from accepting deposits in Yuan. BtC was trading over $1000 yesterday; now it's down to $500 and still falling.

Good.

I want Bitcoin to die in a fire: this is a start, but it's not sufficient. Let me give you a round-up below the cut.

Like all currency systems, Bitcoin comes with an implicit political agenda attached. Decisions we take about how to manage money, taxation, and the economy have consequences: by its consequences you may judge a finance system. Our current global system is pretty crap, but I submit that Bitcoin is worst.

For starters, BtC is inherently deflationary. There is an upper limit on the number of bitcoins that can ever be created ('mined', in the jargon: new bitcoins are created by carrying out mathematical operations which become progressively harder as the bitcoin space is explored—like calculating ever-larger prime numbers, they get further apart). This means the the cost of generating new Bitcoins rises over time, so that the value of Bitcoins rise relative to the available goods and services in the market. Less money chasing stuff; less cash for everybody to spend (as the supply of stuff out-grows the supply of money). Hint: Deflation and Inflation are two very different things; in particular, deflation is not the opposite of inflation (although you can't have both deflation and inflation simultaneously—you get one disease or the other).

Bitcoin is designed to be verifiable (forgery-resistant) but pretty much untraceable, and very easy to hide. Easier than a bunch of gold coins, anyway. And easier to ship to the opposite side of the planet at the push of a button.

Libertarians love it because it pushes the same buttons as their gold fetish and it doesn't look like a "Fiat currency". You can visualize it as some kind of scarce precious data resource, sort of a digital equivalent of gold. Nation-states don't control the supply of it, so it promises to bypass central banks.

But there are a number of huge down-sides. Here's a link-farm to the high points:

Mining BtC has a carbon footprint from hell (as they get more computationally expensive to generate, electricity consumption soars). This essay has some questionable numbers, but the underlying principle is sound.

Bitcoin mining software is now being distributed as malware because using someone else's computer to mine BitCoins is easier than buying a farm of your own mining hardware.

Bitcoin violates Gresham's law: Stolen electricity will drive out honest mining. (So the greatest benefits accrue to the most ruthless criminals.)

Bitcoin's utter lack of regulation permits really hideous markets to emerge, in commodities like assassination (and drugs and child pornography).

It's also inherently damaging to the fabric of civil society. You think our wonderful investment bankers aren't paying their fair share of taxes? Bitcoin is pretty much designed for tax evasion. Moreover, The Gini coefficient of the Bitcoin economy is ghastly, and getting worse, to an extent that makes a sub-Saharan African kleptocracy look like a socialist utopia, and the "if this goes on" linear extrapolations imply that BtC will badly damage stable governance, not to mention redistributive taxation systems and social security/pension nets if its value continues to soar (as it seems designed to do due to its deflationary properties).

To editorialize briefly, BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions. Which is fine if you're a Libertarian, but I tend to take the stance that Libertarianism is like Leninism: a fascinating, internally consistent political theory with some good underlying points that, regrettably, makes prescriptions about how to run human society that can only work if we replace real messy human beings with frictionless spherical humanoids of uniform density (because it relies on simplifying assumptions about human behaviour which are unfortunately wrong).

TL:DR; the current banking industry and late-period capitalism may suck, but replacing it with Bitcoin would be like swapping out a hangnail for Fournier's gangrene. (NSFL danger: do not click that link)

902 Comments

1:

Bitcoin = Digital Tulip Bulbs.

2:

The best snarky name I've read for BtC is "Dunning-Krugerrands".

3:

If we didn't have the banking issue we have had recently then the BitCoins would have been almost exclusively used by the less savory part of society.
But as we did have the problem the BotCoins appeared to be a proper alternative, I can kind of understand that.
I do agree with mr Stross though. No matter who controls the currency, they all seem like money grabbing bastards. If it is proper money, you can at least find out where they live...

4:

The bitcoin people are about to get a harsh lesson in why you want a central bank.

As long as bitcoin was deflationary (i.e. the price of goods and services was going down, in terms of bitcoins, i.e. the value of bitcoins was going up), everyone was happy. And the fact that there was no central bank to prevent run-away deflation was considered a good thing. This is because everyone was looking at bitcoin as an investment, not as a currency. But once things turn inflationary (i.e the value of bitcoins is going down), it turns out there is no central bank to prevent runaway inflation either.

For fun, calculate what the inflation rate has to be for a currency to lose half it's value in a 24-hour period. Lets just say that Zimbabwe and the Weimar Republic should no longer be the (ahem) gold standards for runaway inflation.

The thing about the inevtiable, it has a bad habit of actually happenning.

5:

I see it as something of a prototype for digital currencies. It is very inflated (though that doesn't stop me from wishing I had mined a few years ago when I first heard about it.)

The flaws of bitcoin aside, I think we'll see more private currencies in the future. Governments are doing their best to regulate them or outright ban them, but I'm not sure how successful they will be in the long run.

6:

On the down side, due to its deflationary nature, it's hard to think that Bitcoins will ever fully die off, at this point. I think it crossed the threshold of stability, and since BtC will always get slightly more valuable with time, I think we're stuck with them. They'll sit in the background, bubble up from time to time, and mostly just be a nuisance.

7:

No. Bitcoin could only be considered equivalent to tulip bulbs it tulip bulbs were Triffids and had been unleashed on the Dutch as a weapon of sabotage.

8:

Charlie, are you actually worried that Bitcoin might win? Because I don't see how it possibly can.

9:

A lot of people who should know better seem to think it's a good thing.

I'm not saying all cryptocurrencies are inherently bad. But Bitcoin in particular was designed with an agenda in mind, to further certain ideological goals that I consider to be toxic.

10:

Hmmm.

Or BitCoin could actually be a False Flag operation. To control a globally unregulated digital currency you need a globally regulated internet - a mandatory surveillance program on every computer (hard-wired into the CPU, obviously).

How is this for a horror scenario? :-)

11:

http://pando.com/2013/12/16/bitcoin-has-a-dark-side-its-carbon-footprint/ does not make for a good source. They are using bad information in compiling their report.

The report uses energy consumption numbers from https://blockchain.info/stats which are pretty much made up. DO you really think that the entire Bitcoin network is mining at a $19 million a day loss? Energy consumption numbers listed on that page are not sourced from anywhere.

12:

The destruction of the redistributive welfare state would indeed be bad. But I don't read that as BitCoin's agenda. It seems more like an unfortunate side-effect of the real agenda, which is destroying the crony-capitalist banking system that led to the 2008 collapse (if it pisses off and/or nobbles the "surveillance-industrial complex" along the way, all the better.)

I think these last two goals are eminently worthy and I'd love to hear proposals for executing them without the unintended side-effects on the welfare state.

13:

since BtC will always get slightly more valuable with time

I think that's a dangerous statement to make in view of its extreme volatility. Yeah, if you mean the long term price trend with the bubbling stripped out, that's plausible, but you're looking for a small signal buried in a lot of noise.

(Or in other words, it depends on from where you draw the line. Start when it was valued at less than a dollar, you may find it never drops below that point. Start from yesterday's $1000 level, and it may be it never reaches it again.)

14:
very easy to hide
Well, strictly speaking, it is impossible to hide, since all transactions and thus all accounts are fully public. Anyone can check the amount in your wallet.


The only difficulty is figuring out which among the 2^4096 wallets is yours. Once that is known, tracing becomes a little more tractable. Most traces will start at the currency trading place, where your account is definitively not anonymous.


(oh, and I hate goldbugs as well)

15:

I don't think they're smart enough to do that (for any value of "they" less pervasive and creepy than the Bavarian Illuminati, Robert Anton Wilson version).

My impression is that the TLAs like the NSA or GCHQ have some really smart, well-adjusted folks running around, but there's so much Shit Happening that all they can do is stay in reactive mode the whole time. They have huge management overheads -- too many committee meetings and classification levels -- not to mention some degree of legal constraints and oversight (even if it's not transparent or accessible to those of us on the outside) that would hamper really fiendish long-range plots like this. Anyway, why would they bother? All they'd need to do is nobble the CEOs of Intel and ARM Holdings and that's 95% of the job done.

Bitcoin to me looks more like the work of one of the scary-bright early 1990s cypherpunks -- I've heard Nick Szabo mentioned as a possible "true name" for "Satoshi Nakamoto". (I'm pretty sure it's not the work of he who goes by the handle Mencius Moldbug these days -- he has his own politically-disruptive software project on the go -- or Tim May or, or, um, blanking on names.)

16:

I largely agree, but there's a couple of points on which you're not quite correct:

- Bitcoin's carbon footprint is less about the increasing difficulty, and more about the nature of mining: it's configured so that no matter how much processing power is thrown at it, the amount of currency generated remains the same. As more people add miners, it gets _less_ efficient. A single machine would produce as many bitcoins per day as the entire planet's collective computing infrastructure.

- Because CPU mining is so much slower than using dedicated hardware, people distributing malware aren't likely to earn much at all - so the thieves won't prosper.

17:

Once upon a time, small change, things like pennies, didn't have a consistent exchange rate with national currencies. The coins were too expensive for national governments to produce consistently, leading to shortages and inflation, and it disproportionately affected the poor, who used small change for their transactions. Over the centuries, people hoped to profit from schemes to mint small change during shortages -- sometimes legally, sometimes not.

Bitcoin is the Bizarro-world mirror image of that. Expensive, a plaything for the rich, easy to produce, but inherently deflationary. There is a constant, though: the schemes to profit.

However, like the variable value of a penny, there appear to be ways to tame it. Of course, those methods will cause Bitcoin to lose its comparative advantage in the black market and among ideologically-motivated speculators. Too bad, so sad.

18:

Triffids in Tulip-er Holland... I would read that novella.

19:

Charlie,

I am a great admirer of your work, so it really pains me to see that you've made this post based on fundamentally inaccurate information.

Your primary assertion "Mining BtC has a carbon footprint from hell" is based on untrue 'research' published by the site bitcarbon.org, which is referenced by the source article you link to.

Bitcarbon based their entire calculation on a wildly-inaccurate, very outdated guesstimate of power consumption they found at https://blockchain.info/stats

Clearly neither Bitcarbon, nor your source, made any effort to verify this number (despite a note at blockchain.info pointing out that it is probably not reliable). This totally undermines their data and brings all of their claims into question.

The fact is that the hardware that Bitcoin transaction processors are using today is 50-100x more efficient than it was a year ago. Although the difficulty of the work is increasing, the power consumption is not. In addition, far less power is being lost as waste heat.

https://news.ycombinator.com/item?id=6829860

http://bitcoin.stackexchange.com/questions/10060/how-much-energy-will-the-bitcoin-network-eventually-consume

Moreover, any financial network has operating costs. It costs billions merely to print banknotes. What does it cost to store and transport them securely? What is the cost of running a bank with all its physical branches and staff? Do you also wish them to "die in a fire"?

I hope this information will be helpful, and I look forward to your response.

Mike

ps I use bitcoin and I am far from being a libertarian.

20:
I think that's a dangerous statement to make in view of its extreme volatility.
It's not in view of the volatility, but in view of its acceptability.

Bitcoin can be considered as a currency, traded among banking accounts for financial transactions on the currency market (BTC China, Kraken, all are currency marketplaces, not "bitcoin banks"). Or it can be considered as a money, traded in exchange for goods and services.

Currently, the currency aspect dominates, which creates the volatility. Most currency markets have a dampening effect because the currency is backed by a money, and the free-flowing currency is usually small compared to the GDP of the associated economy. Not so much with Bitcoin.

As (if) the monetary economy around Bitcoin develops, it will come to dominate the flow of currency, and that's when the deflationary effects kick in. We're currently in a regime where the currency traders have a massive influence (fluctuate), plus a deflationary bubble : the amount of goods and services offered for bitcoins grow a lot faster than the amount of bitcoins mined.

So, I do expect for the medium term the ratio of bitcoin/€ (or $) to go up. Unless you get enough uncertainty in the system to break down that deflationnary bubble.


Anyone up for breaking SHA-256?

21:

There is a constant, though: the schemes to profit.

Yeah. "I can't think of anything economically useful or valuable to do, so I think I'll just try and manufacture money instead." Even the bankers issuing subprime loans and bundling them as CDOs and similar instruments tried to kid themselves they were helping people buy their homes. Whereas the bitcoin miners seem to me to have motives closer to the coin-clippers and forgers of old.

Pity we don't have someone of the calibre of Sir Isaac Newton hammering their asses.

22:

Uh, Charlie, this is satire ? I read your supposed-drunken-charlie-turd-tweets, so I'm not entirly sure about it.

- "...Bitcoin to die in a fire" -> a digital one ?

- "Bitcoin's utter lack of regulation permits really hideous markets to emerge, in commodities like assassination (and drugs and child pornography)." -> oh noes, you did it.

- "Bitcoin mining software is now being distributed as malware" oh noes 2.0 !

- "imply that BtC will badly damage stable governance" -> dear...

Anyway, satire or not, I'm ok with you going Trotskyism and I'm eagerly awaiting the re-release of accelerando under the guidance of the fifth international !


23:

And we have a clear winner in the first-libertarian-to-show-up sweepstakes!

24:

My work here today is done.

I shall shortly retire to the pub ...

25:

I don't think they're smart enough to do that (for any value of "they" less pervasive and creepy than the Bavarian Illuminati, Robert Anton Wilson version).

My impression is that the TLAs like the NSA or GCHQ have some really smart, well-adjusted folks running around, but there's so much Shit Happening that all they can do is stay in reactive mode the whole time.

All right, perhaps not a False Flag. But very convenient for a certain reactive mode which may involve destroying even more privacy to save the economy from the horrors of Bitcoin. Also may facilitate intelligence cooperation between Western countries and China, which is not a good thing.

26:

Damm me to - thats the next genre to "borrow" for the laundry the "cosy catastrophe" obviously a post case nightmare green book.

Maybe mutant variants of skunk plants mutate and start wandering around Amsterdam - maybe that Dutch guy from avid could get promoted.

27:

The super-skunk they sell in Ams is definitely toxic, yes: ambulatory hemp plants in a Laundry novel? Yeah, I think I need to file that away for a rainy day.

(In other news: I'm taking a day off writing today, but expect to pass the halfway mark on Merchant Princes #8 some time on Saturday.)

28:

The average return on a hacked desktop running a bitcoin mining malware is in the cents/month. I'm not even convinced it is more valuable as a bitcoin miner or a spambot - I suspect the spam activity would be more remunerative.

29:

"Less money chasing stuff; less cash for everybody to spend (as the supply of stuff out-grows the supply of money)."

There is enough bitcoin for everyone to use. 2.1 quadrillion units after you divide a bitcoin to the eighth decimal place. So this idea of there not being enough for people to spend is logicaly false. This was the only economic point you had. I'm all for supply and demand free markets. The alternative interventions are evil.

30:

Bitcoin is one of those things that never quite made sense to me. That we don't really know who invented it, it seems too good to be true and everyone is flocking to it makes it seem like something straight out of a fairy tale. And fairy tales seldom go well for foolish mortals.

31:

While I’m no expert, I suspect that, when push comes to shove, the untraceability and tax avoidance are going to prove very overrated.

Since it’s a peer-to-peer protocol, there’s nothing stopping the IRS (and its equivalents) from sitting on the network and logging the IP addresses of miners. The use of out-of-country exchanges may make everything else hard for the IRS to track, but if they crack down on the miners, that’s going to seriously undermine the system.

32:

I agree with most of this except:

"Bitcoin's utter lack of regulation permits really hideous markets to emerge, in commodities like assassination (and drugs and child pornography)"

Really, BTC allows them to emerge? Because there were not markets for assassins, drugs, or child-porn before BTC?


Generally my opinion is; while BTC has many flaws, I think competeing currencies are a good thing economically. We need more, but are stifled by the central-bank monopoly. I hope BTC opens the door for better things.....

33:

omg, first time ever someone called me a libertarian.

I shall have a beer, too. *sigh*

(If your pub accepts btc, I'll buy you the first pint from the 0.75 btc I own. Bought them a year ago via a swiss paypal account via a now defunct german bitcoin trading site, which was registered in London and had its account in poland. true story.)

((otherwise, if you ever come to Hannover, I'll buy you a nice Herrenhäuser payed with hard euros))

34:

You drove by from Hacker News, didn't you? Confess!

35:

Come to think of it, that's a good question. How are people paying for illegal stuff on the net now? This is something I never even wanted to risk googling but if child porn rings are turning a profit, someone's paying them somehow and it ain't in hand-written IOU's. Do they use credit cards? If so, how? Aside from the unforgivable ick factor of what's being bought and sold, there's an interesting technical problem here.

36:
There is enough bitcoin for everyone to use. 2.1 quadrillion units after you divide a bitcoin to the eighth decimal place.
You are mistaking the total amount for the individual value.


The total amount of bitcoins is fixed. However, if you use it as a money, i.e. for goods and services, the amount of those goods and services available for that money is NOT fixed. So the cost, which is simply the ratio of amount/good is completely tied to the goods. In an economy, the ratio of goods+services vs available money is an important indicator of the working of the economy. Read the pointers given by our host on inflation and deflation to see what a change in that ratio does to an economy.


One of the points (which is sold as a "very good point") is that the monetary policy of the Bitcoin Central Bank is hardcoded, and cannot be changed (except by an unlikely consensus of almost every bitcoin software user and writer). Conversely, an unflexible monetary policy... well, it's a bit of what's causing right now the euro woes (Central Banks refusing to change their policies in response to facts, and sticking to theories).


Right now, it's not a problem. It's not a problem because there is NO Bitcoin economy sphere; every single bitcoin actor (customers, sellers) operate in a sphere where alternate payment methods abound and in fact dominate their economic function (save for all those "bitcoin lotteries! Win thousands for cents!"). So those alternate moneys stabilize the non-existent bitcoin economy.

38:

Yup. You will note that most credit card transactions go through two agencies -- Visa and Mastercard -- who are easily leaned on not to handle payments for stuff governments disapprove of. Paypal are similarly problematic. Any centralized lending or credit agency is vulnerable to a single point attack, and banking regulations are the fulcrum.

Now, whether you think this is a bad thing or a good thing is the real question.

I'm not happy about payments to wikileaks being blocked by governments leaning on credit card agencies and Paypal. But I am totally cool with governments not allowing markets in anonymous assassination to emerge. Note that this is an essentially political issue.

The key problem with bitcoin is that it erodes the power of states to regulate. Which might look nice at first wrt. being able to help those nice wikileaks freedom-of-speech folks out, but begins to look a bit different when the tax revenue base implodes and takes down the social security net, medicare/medicaid/the NHS, pensions, police/fire/ambulance provisions, road repairs, and so on.

39:

Bitcoin is currently being used as part of the ransom payment scheme in the CryptoLocker Malware scam, and directed at lawyers in British Columbia, Canada.

The scheme eventually requires a money-laundering vendor, and so brings bitcoin onto the radar of folks who worry about money laundering. Said people in BC are, of course, inclined to listen to enraged members of the Bar (;-))

Thus: technologies which are designed to be attractive nuisances are also attractive to the nuisance-removal people. If the nuisance starts being life- or wealth-threatening, then it becomes "interesting" to crown attorneys and police forces.

--dave

40:

Wow ! This is an ignorant rant.

Almost every point made is totally incorrect.

It is central planning (e.g. central banking) that relies on a gross oversimplification of society NOT libertarianism. Do you even have a definition of libertarianism ?

Do you hate left and right libertarians equally ? What about anarcho-capitalists ? Or maybe geo-libertarians are the true evil ? Competition IS NOT EVIL. Force from the top is evil.

41:

Bitcoin strikes me as useful in confronting libertarians with the consequences of their theories. It turns out that a truly unregulated market in money is epically boom-and-bust, intensely unequal, full of crooks, a means to make crime pay, and a quick way to lose your shirt. Who'da thunk.

42:

With regard to the criminal mining (use of malware to mine bitcoins) I think this will this will almost completely disappear in the near term.
Due to the changing nature of the complexity of the bitcoin mining process, the ability of commodity hardware to mine a dollar value of bitcoins in a week is so low that mining bitcoins is likely not an efficient use of a compromised computer.
If I were a cyber criminal and I had a couple hundred computers I would likely be able to make more money with the computer sending spam or engaged some other type of fraud (click fraud comes to mind but it could be whatever) That I think you will see very little of that criminal misuse going forward.

With regard to bitcoins being investment currency.
There seams to be an endless legions of investors in the bitcoin thrall and they are all missing the point. The value of bitcoin is going to go up and down but in an unpredictable manner making it a poor investment. However, as a transaction currency it can work very well. as a transaction currency its volatility is problmatic. If the volatility issue moderates it will have a huge impact in micro transactions and other types of web transactions. I see it as a potential PayPal killer.

43:

"Bitcoin is pretty much designed for tax evasion."

So is cash (Bitcoin is basically digital cash), are you going to ban cash transactions too?

44:

And we have a clear winner in the frothing crank competition!

Roll up! Roll up! The freak show is coming to town!

(NB: The comment this is a reply to is borderline for a yellow card. I'd appreciate it if the visitors would take time out to review the moderation policy; it might save us some annoyance later ...)

45:

Oh also, it would be *really interesting* to see who's been shorting BTC just before the big busts.

46:
Do they use credit cards?
Usually more like money orders.


One of the thing you need to understand when trying to use "untraceables bitcoins" is that every amount is fully traced. Someone paying with bitcoin a shady site full of child porn will have the transaction from a wallet he uses to a wallet the porn operator uses visible for essentially the entire existence of Bitcoin.

Once the Feds unwrap something like Silkroad, they get the number of the wallet where your bitcoin ended, and can trace back all people who sent bitcoins. At the other end, you probably got your bitcoins by going to a marketplace, putting down some € there, and getting bitcoins transferred from the marketplace account to yours. So the police notices that the transaction chain goes from Silkroad to Kraken, they send a subpoena to Kraken to identify who did the transaction crediting your initial wallet, and you're done.

(you can attempt to obfuscate the path leading from purchase to spending using intermediate wallets, splitting and combining amounts, but unless you manage to implicate "mules", i.e. wallets of people unrelated to you thru which the amount flows, you don't have a Caiman Island banking trust to hide any of the transactions).

47:

This is kind of a "money spent on space exploration could have been better spent on more worthwhile things" kind of logical fallacy argument, but... I read that the raw computation power used for mining bitcoins is now exa-obscene (and, granted, we already waste a lot of monies on video games and horrible movies). Couldn't we expend that computing power on more worthwhile projects? Anyone have an idea how many protein folding solutions, or controlled fusion simulations, or BEC spin resonance scenarios, etc., bitcoin processing could have done so far?

48:

You should probably get more acquainted with the concept of "Level 3 Assets" since we taxpayers have assumed such a large stake in them.

A Level 3 Asset is priced indirectly by a model, which can be proprietary. That is, the value of a Level 3 Asset can be pretty much whatever the binary black-box code I wrote say is is, all this is legal and fine with GAAP!

Now, during the financial crisis, banks could deposit these things with central banks as a collateral for new loans - which effectively means turning these things into real money. Knowing how the banks operate it is logical that they would hurry up and produce as much as these things that they possibly could while the going was good. Then deposit at the FED, in return they get proper bonds, that trade on a real exchange, and they are "capitalised" again.

If one checks with ISDA, who keeps a sort-of check on the unregulated derivatives market, indeed the "value" of the derivatives increased during and after the financial crisis.

Modern Finance is like "Fraud all the way down"!

49:

My current theory is that bitcoin is designed to cull libertarians from the herd. Get them using a fiat currency, then show them the power of deflation.

50:

Your argument makes two claims: (1) Bitcoin makes it harder for governments to control where people spend their money, (2) Bitcoin makes it harder for governments to tax their citizens.

Claim 1 is probably true, as long as the purchases are not illegal (donating to wikileaks was not illegal but merely blocked). The US government has been fairly effective at tracing Bitcoins used in illegal transactions. That is, they know you donated to wikileaks, but they can't prevent you without charging you with a crime after the fact.

Claim 1 does not imply Claim 2. I've talked to some US banking regulators and they don't think taxing Bitcoin is a serious problem. In fact when compared with cash or valuable objects such as gold, Bitcoin is far easier to trace and tax. Everything would be easier for the IRS if tax dodgers switched to Bitcoin.

The question is not if you can tax Bitcoin, clearly you can, the question is at what point does it make sense to tax Bitcoin. Do you tax each time bitcoins move from one wallet to another? If so at what exchange rate. My personal view is that Bitcoins will probably be taxed, like stocks, when you cash them into local currency and/or when you purchase something with them (sales tax).

I worry that you may be confusing the political ambitions of Nakamoto with the actual realities of Bitcoin.

51:

About black market online payments now, here's an interesting overview from Brian Krebs from back in May.
http://krebsonsecurity.com/2013/05/underweb-payments-post-liberty-reserve/

He points out how Bitcoin's volatility makes it undesirable as a payment mechanism.

Before LibertyMarket, there was eGold.

For discussions of dark payments in the physical world, take a look at Loretta Napoleoni's Rogue Economics - http://www.amazon.com/Rogue-Economics-Loretta-Napoleoni/dp/1583228241. For example, one direct effect of the Patriot Act was greater difficulty hiding large transfers of cash in USD. The first order unintended consequence was a drive by the Colombian drug cartels into the Euro. The second-order consequence was new business relationships between the cartels and the 'ndrangheta. The third-order consequence was increased distribution of cocaine across Europe.

The Krebs article is an illustration of Napoleoni's core argument: underground/illegal economies move faster than nation-states can react.

52:

You're being more tolerant than I would with a drive-by who's being actively personally insulting.

53:

Let's try to refute your points one by one:

"Mining BtC has a carbon footprint from hell (as they get more computationally expensive to generate, electricity consumption soars)"

Bitcoin is not not necessarily going to be more computationally expensive to generate. The difficulty could also decrease in the future or it could remain the same as it is now. Also, the electricity is not wasted, it provides integrity and security for the entire bitcoin payment network. How much resources do you think banks spend to keep their deposits safe from hacking and physical theft? Do you also consider those resources wasted?

"Bitcoin mining software is now being distributed as malware because using someone else's computer to mine BitCoins is easier than buying a farm of your own mining hardware."

It's not easier (otherwise, everyone would do it). It's maybe cheaper, but it's also illegal and can land you in jail. Mining BTC's on stock computer is also not very effective and the profits will decrease in the future if the difficulty of mining would rise.

"Bitcoin violates Gresham's law: Stolen electricity will drive out honest mining. (So the greatest benefits accrue to the most ruthless criminals.)"

Botnets make very small portion of the mining market. As stated above, cpu mining is very ineffective and can in no serious way compete with mining on specialized hardware (ASIC chips). See https://blockchain.info/pools for current stats. Botnets would be some portion of the "unknown", in other words - less then 14%.

"Bitcoin's utter lack of regulation permits really hideous markets to emerge, in commodities like assassination (and drugs and child pornography)."

Bitcoin lack of regulation is a myth. You write about china regulating bitcoin in this very article. Other existing regulations (KYC/AML laws, MSB licences, income/capital gain taxes etc.) already apply to bitcoin. Bitcoin lacks central authority but this in no way means that it is somehow extempt from our legal framework. Drugs should be legal anyway so i consider drug markets one of the good things bitcoin enabled. Assassination/child pornography/weapons are different matter but those markets already existed before bitcoin and i don't think bitcoin had any effect on their size. Ever tried to ship some illegal weapons via mail service over borders?

"It's also inherently damaging to the fabric of civil society. You think our wonderful investment bankers aren't paying their fair share of taxes? Bitcoin is pretty much designed for tax evasion."

Bitcoin is like cash. I agree with you that it is (relatively) easy to avoid paying taxes using cash or bitcoins. There are two solutions:
1) ban financial privacy, make reporting of every transaction mandatory so it can be taxed properly. Bitcoin actualy helps with this solution as every transaction is already public in blockchain. The only step remaining is to enforce proper registration of bitcoin addresses with their owners (and ban transactions from/to unregistered addresses)
2) reform tax laws so we actually tax the things that make sense - land and physical property. there is no reason to tax income, financial transactions, sales, gifts, inheritance, capital gain, alcohol/tobacco consumption, gambling, import and export etc. (you name it). It makes no sense. If people did more of those activities, there would be no harm as those activities are not limited resources. Taxing land/properties and other limited resources on the other hand makes sense. They are limited so we want them to be utilized effectively. We don't want rich people to squat large areas of land or lucrative buildings in city centers without using them properly. As a bonus, with limited resources you can easily keep track who owns them and who should pay taxes on them. You also keep the financial privacy. This would be my preffered solution.

54:

Maybe the NSA created bitcoins simply to root out people that they can later squeeze - or bust to meet KPI's?

Bitcoins are created by smart people and there is a sort-of inverted NSA-ish logick in creating anonymous money that has the path the money took embedded into it every time it is "spent". Like placing a GPS chip with memory in every dollar bill, but much cheaper and less prone to whining from the people who support potential terrorists by being against surveillance.

55:

To be honest, I rather think our gracious host may be missing the positive side of experimental currencies, and of tax avoidance measures of all kinds. Experimental currencies are good because they keep the idealists poor and the libertarians are kept thinking.

Tax havens or tax dodges are similarly a good thing because they limit how much tax a government can extort. France is currently re-discovering the Laffer Curve; the UK is a net beneficiary here as quite a few rich French businessmen are decamping to these shores to avoid excessively stupid and greedy taxation.

All Bitcoin does is gives the over-taxed a greater plurality of ways of avoiding tax, whilst remaining rich. If you remove these ways, then two things happen. The aspiring rich quite often simply give up on the idea, and the government then loses these potential tax revenues entirely. Other more criminally minded people go into politics, and the political sphere then starts to resemble modern Russia, where politics, money and criminality are inextricably linked.

It all really comes down to how you keep a government honest, and the only way thus discovered is to allow citizens to legally escape taxation if they but expend some effort to do so. Any other path seems to lead to eventual ruin.

56:

OGH said

"And we have a clear winner in the first-libertarian-to-show-up sweepstakes!"

and also

"And we have a clear winner in the frothing crank competition!"

I think OGH is getting a tad bored with writing non-stop, and decided to take a break and see what he can flush out of the woodwork. And boy, is it working.

57:

This isn't quite the answer to your question, but addresses pieces of it. In fact, "how do we deal with the money from our completely illegal enterprise" is a huge issue, and back in the 1990s the U.S. government started a fake bank, laundered money for drug dealers for a while, and then arrested hundreds of people using the information they got: http://www.npr.org/blogs/money/2012/11/20/165590860/episode-418-how-the-government-set-up-a-fake-bank-to-launder-drug-money

(It's a really fascinating piece, about 20 minutes long.)

58:

Bitcoin is ideal tool for a task like this because despite the fact that it is "anonymous", as soon as one account become "dirty", all the related accounts can be easily tracked and if some of them is associated with real person somehow then bah!

59:

Oh, yes, please explain to me how tax evasion is a moral good. Oh yes, the poor overtaxed rich.

Which may be the same guys that evade around 79 billion € per year in Spain while we cut all social services for the ones that pay they taxes religiously because you cant evade your pitiful paycheck.

But really, lets give the poor wealth creators a break.

60:

The power figure you are quoting is wrong by a factor of at least 100. It's based on the data on this page:

https://blockchain.info/stats

Note in their assumptions they say:

"Electricity consumption is estimated based on power consumption of 650 Watts per gigahash and electricity price of 15 cent per kilowatt hour. In reality some miners will be more or less efficient."

This is based on GPU mining, which hardly anyone is doing any more. Most people are using ASICs and a more realistic power figure is 2-3 Watts per gigahash, and the most efficient units are 0.6 Watts per gigahash.

Take note that on that page it also states that miners are *losing* nearly $19M per day on electricity spending based on their power estimate.

61:

The Laffer curve is of course unrelated to the matter of tax dodging and tax avoidance. Moreover, last I read, if you ran the maths (something libertarians and their ilk are loath to do) you end up with the top rate tax level somewhere north of 50%.

62:

I've been following the Bitcoin saga on and off for over two years now. (started June 2011 or so) I keep expecting it to go down in flames, and it keeps rebounding. I have no idea how it keeps going. I remember when $30 per Bitcoin was the astounding high it would never hit again before a terrible crash. Now it hit $1000 and crashed again? Geez.

All the points brought up in the article are the same things I've been seeing sensible people say about Bitcoin from the beginning. And yet it keeps gaining an odd form of legitimacy. Someone's going to write a hell of a dissertation about it in a decade or two, I think.

I don't think it's a deliberate operation to bring down the banks, though. Before the first craze hit it was just a cryptographic toy, a "hey look at this" program. Then the libertarians got a hold of it and made a community around it. It's about then that Bitcoin goes nuts and starts on the boom and bust cycle we see today.

As for the future...I'd like it to go down in flames, but every time it has so far it rises again a few months later, like a phoenix born from neckbeards and fedoras. I've given up trying to predict when the inherent problems are going to catch up with it. Now I'm just hoping my dad doesn't get involved...it was bad enough when he was obsessed with buying gold.

63:

Actually, it looks like I may be mistaken, they appear to be basing this on bitcarbon, which says:

"...the carbon footprint of the Bitcoin mining network will be proportional to the exchange rate of Bitcoin assuming that 90% of the dollar value of Bitcoin is spent on electricity."

but I think based on more reasonable power usage estimates that number should be somewhere around 10% not 90%.

64:

Seems to be rebounding now. Or at least got to 600$

I think the yoyo is very profitable and somebody figured out that no ammount of reality is going to make the true believers go away... for now at least. So every crash is an investment opportunity...

65:

"Going Gault"...I still wonder - who mowed John Gault's lawn? Objectivist immigrants?

66:

Of course that may end up being a game of chicken...

67:

Even the bankers issuing subprime loans and bundling them as CDOs and similar instruments tried to kid themselves they were helping people buy their homes.

Hahahaha! I just snorted my(dumb brewed)tea. You haven't worked on/dealt with Wall Street, have you?

Bitcoin may well not be the answer, but I would very much like a transaction mechanism that is anonymous and not vulnerable to simple theft. I am personally sick and tired of stores collecting my purchasing information. I don't want to have to go to ATMs to get cash that could be stolen. I don't trust S/W companies to offer no strings attached electronic wallets.

I want convenience and anonymity. Is that too much to ask for?

68:

Those criticising Bitcoin for its 21 million max property have missed a few things. If your design criteria for a currency is a p2p system with no central authority, then the way to bootstrap it leaves you with few options. Halving the reward every four years is a very elegant option, and in some ways the only one that really works.

But this is such a complex system that I just don't have the energy to elaborate on it here, since I think I came to this party way too late for anyone to listen.

I have studied Bitcoin extensively for over three years, and I believe it will be as big as the internet in how it will change things.

Of course it will bring out scary things, such as assassination markets, but the genie is out of the box, and the benefits are huge compared to the drawbacks. Again, compare it to what people said about the internet when it hit mainstream! "But it will be filled with porn and violence".

So, the Gini coefficient is high. It has been out in the open for FIVE FUCKING YEARS. It is not OUR fault that you guys didn't pay attention until now. But the whole discussion is stupid. Bitcoin is a niche currency, why does it matter if it isn't evenly spread over the land to everyone?

69:

Now, whether you think this is a bad thing or a good thing is the real question.

I think this will boil down to what the primary terror was for each person in their formative years. If you grow up with weak and ineffectual government, you want someone to come in and protect you from the bandits and corporations that are abusing you. If you grow up with strong government, you may see them as the problem and want the free market to come in and save you.

We'll always be familiar with the failings of the current system and only see the marketing brochure for the new system, not yet knowing what the shortfalls will be until we make the switch.

70:

Bitcoin is also a major Economics 101 fail. With a mildly inflationary currency, there is a really good incentive to invest in new business, expansion, etc - if you just sit on the money, it slowly loses value, but if you invest, you may be able to make money, or at least stay ahead of the inflation curve.

With a deflationary currency, there's no longer the incentive to build that new factory, launch that startup, buy shares in a company, take a risk - just sit on the currency and it becomes more valuable (for loose definitions of valuable, in the case of Bitcoin)

At least with gold, mining more gold creates some jobs, and the increase in difficulty is probably closer to linear... think of gold as an O(n) currency, bitcoin is closer to O(n^2).

(Having said that, starting a competitor is tempting. Just make sure to mine the easy stuff for yourself first, then sell it off as the suckers move in)

71:

It's really only the techno-libertarian types that are interested in bitcoin. As a group libertarians tend to be rather conservative when it comes to ways of storing wealth. You'd find gold and land is much more popular. Or ammunition, with the survivalist types. :)

72:

And while civilization crumbles under the death
rays of the evil bitcoin empire.. Mark Zuckerberg
alone still holds more money in his piggybank
than the peak bitcoin market cap.

Anyway. Don't let minor factoids like that get in the way of a perfectly fine frothing...

73:

(Having said that, starting a competitor is tempting. Just make sure to mine the easy stuff for yourself first, then sell it off as the suckers move in)

All altcoins are traded against each other, so it doesn't matter.

Me, I regret I missed the dogecoin train. Wow. So crypto. Much value.

74:

I haven't seen anyone mention my favorite nickname for Bitcoin, courtesy the commentariat (or possibly the host, Yves Smith) at Naked Capitalism: prosecution futures.

75:

France is currently re-discovering the Laffer Curve;

Ding! You said "Laffer curve". I say "crank". Put it another way: we've had 30 years of "trickle down" and I have yet to see any sign of the Gini coefficient diminishing.

This may be a feature, not a bug, in your weltanschauung, but I for one would prefer to be an average citizen in a social-democratic utopia than a billionaire cowering behind barbed wire in a hellish kleptocracy.

76:

The BitCoin pattern of repeating peak-and-crash has some interesting implications. Let's say there's two types of buyers: True Believers and Speculators. The True Believers plan to buy and hold until the crypto-currency utopia comes true; the Speculators plan to sell as close to the top as they can.

We start with low-value BitCoins, and assume both types drift in at equal rates. As more people invest, the value starts to climb, drawing in more people in the usual bubble pattern. Then it bursts -- bad news, random fluctuation downward, whatever. The price starts dropping. At this point, the Speculators start to sell, but the True Believers see only cheap coins, and buy instead. The price bottoms out when all the Speculators have left the market, and the cycle repeats.

The net effect is that the Speculators end up with all the USD, and the True Believers with all the BitCoins. The whole system acts as a mechanism for the Speculators to extract value.

77:

My unique-visits-per-day metric was dropping.

Also, today's a no-writing-novel day (I've cranked out 44% of a novel in 23 days; I need some recharge time). Finally, the Bitcoin buzz has been getting on my tits all week; it was time to strike out.

78:

My hypothesis: when the social elevators are thin enough, capillary forces prevail and wealth actually flows up.

79:

The Invisible Hand of the Market mowed John Galt's Lawn. With tweezers.

80:

The lawns of true Objectivists don't need to be mowed.

81:

If one did computation in a building requiring heating, and if the power was nuclear, then it might be a reasonable way to keep warm at low carbon cost.

As to the rest, I'm still not sure bit coin is money rather than commodity (and alarmed at the idea that money is a commodity).

82:

Well yes, that would appear to describe Disaster Capitalism as currently practiced in the western world quite cogently. (We're in the midst of the biggest transfer of wealth from the poor to the rich since the 1930s. Probably since the 19th century.)

83:

Guessing the CIA released bitcoin to distract bugs like me from gold and silver - get us to sell our metals to keep prices down and replenish gov't stockpiles so they can pay back Germany's gold, then crush the bitcoiners in a burst bubble.

84:

This nerd deleted my comment, and is against free and open source software? I bet you use a mac, fascist. I was just providing the people any easy way to dispose of their coins to fuel the fire that bitcoin can die in. - 1CJfPXHMtwdqoJGHyBkuaJ3Q14N9TiYrzV

Bitcoin wasn't created with a political agenda, it was created as an easier way to send money online. That's like saying that SMS or Email was created with a political agenda.

So are you going to be a wiener and delete this comment again, or try to make actual disscussion?

Love and peace,
S. Nakamoto

85:

What are your thoughts on dogecoin? doge have no political agendas. shibe just want to go to the moon.

http://reddit.com/r/dogecoin

wow

86:

I keep seeing "a computer is not very efficient in mining BitCoins" as an argument against malware mining. The authors seem to be conveniently forgetting that malware ideally does not target "a" computer. It targets "every possible computer accessible". If you get thousands or millions of machines to do something inefficiently, it starts to get much more efficient. Case in point: Google uses thousands upon thousands of relatively cheap rackmounts to do supercomputer-style parallel calculations. Malware mining is a fabulous deal for the perpetrators: they invest in building the engine, and let all the owners of infected machines pay the bill for it.

87:

Yellow card

Please read the moderation policy before you comment again, S. Nakamoto.

Hint: this is not the United States, I'm not the government, and you have no absolute right of free speech on this private blog which I pay for out of my own money and run for my own amusement. If you want to exercise your free speech rights, go get your own blog.

Yes, I'm using a Mac. (And I wear black. JUST LIKE HITLER.)

All technologies come with an implied political agenda, if only because they rely on infrastructure that has logistic prerequisites -- pipes or wires in the ground/overhead, folks in uniform to run around delivering those telegrams, whatever.

88:

Charlie, you really should consider switching from a mac to a computer that respects your freedoms. Use of proprietary technologies like those that come from apple restrict your freedom and don't really allow you to use your device to the fullest.

I suggest checking out some operation systems listed here - https://www.gnu.org/distros/free-distros.html

and perhaps switching from a mac to a lemote - http://www.lemote.com/en/ with open hardware.

Thanks and have a nice day,
S. Nakamoto

89:

Yes Charlie, definitely switch to one of those distros if you want to spend all your time tuning the operating system and not working...

90:

I think we reached the Poe's Law point.

91:

While it's true that these operating systems are not the childrens toy equivalent of computers like macs are, most people with at least a fifth of a brain can use one. I would reccomend trisquel to the more "simple minded"

Hugs and kisses,
Satoshi N.

92:

Dude, I spent quite a few years as Linux/software libre columnist for the second best selling monthly newsstand computer magazine in the UK. I quit a decade ago; found I prefer an environment that helps me Get Stuff Done, rather than endlessly recompiling kernel modules.

In my prehistory I got a CS degree and worked for a UNIX house.

Grandmother, eggs, sucking thereof: if granny chooses not to suck eggs because they taste bad and smell rotten, you might consider respecting her choice.

(I am now off to the pub to drink warm beer that smells faintly of rotten eggs. Because I can.)

93:

Charlie, why would you ever quit doing gods work?
Did they nsa pay you to stop fighting for electronic freedom?

Enjoy your beer,
S. Nakamoto

94:

Nah, no way this is a real person.

95:

I suppose the only way to prove this would be to add captcha support to the comment box, but i promise that I am as human as you.

011100110111010001101111011100000010000001110100011100100111100101101001011011100110011100100000011101000110111100100000011000100110110001101111011101110010000001101101011110010010000001100011011011110111011001100101011100100010000001100100011101010110010001100101

love and kiss.
s. nakamoto

96:

Clarification: it's a troll.

97:

(S)he is funny though; perhaps we should keep them as a pet?

98:

If you grow up with strong government, you may see them as the problem and want the free market to come in and save you.

And if you grow up in your parent's basement, then you are shaped by an environment where the fundamental constraints on what you want to do are shaped neither by scarcity nor malignance, but _by genuine good intent_. Your relatives probably don't wan't you to spend all day smoking pot and playing video games; in some cases they will over-estimate just how much of a bad thing that is. And even if they _are_ right, it's not like anyone facing such hectoring is going to admit it.

Pretty much every libertarian position can be understood in that frame of restrictive but benevolent authority being the root of all 'real' problems. It's a rare parent who literally tortures their kids, so torture is, at best, not a 'real' issue, not a priority. But many make them do stuff for their health, so mandatory health insurance is a big deal. Pretty much no parents kill their child with drones, many read their diaries. And so on.

So to libertarians, Bitcoin is like wages from a fast food job as opposed to an allowance; lets you buy what you want without someone else having a veto. Only money that doesn't judge you can be considered entirely yours...

99:

"Let's say there's two types of buyers: True Believers and Speculators..."

My sense was that the earlier spike (early this year) was driven by speculators. But this one appears to have been *neither* -- rather, people in China using it pragmatically as a way to move currency around without the government noticing. Thus the impact of Chinese regulation.

The "deflation" argument only bites if there's a full-on bitcoin economy, and I don't think we're any closer to that than we were on bitcoin's first day.

One model of "bitcoin success" is as low-friction cash, accepted as alternative currency more or less everywhere. In this form the fixed supply doesn't matter, because most users are buy-here-sell-there-immediately. The people who are holding big pools are one-time winners, much like anybody who got in on the ground floor of something. (People who bought Apple stock in 2005, etc.)

(Then there's the argument over how untraceable people *really* want their cash to be -- see the Sheep Marketplace story from a couple weeks back.)

I guess the point is that the value of the system is very dependent on external factors. Bitcoin is not going to break banks, or nation-states, or the world, because it's not *that* different from anything that currently exists: it's not absolutely untraceable, it's not absolutely unregulateable, it doesn't have exactly zero transaction costs. It will wind up fitting in somewhere. This is a boring position to take in a political argument, I know.

(On the other hand, the unbounded capital cost of mining is pretty damning. Regardless of whether that one carbon article was accurate, it is still true that there's an arms race to burn money on mining.)

100:

Well, Bitcoin is volatile, at least partly because there aren't many people trading it. I'm sure there will be many more ups and downs. It will be more interesting to see what it does long term. I think the main problem for it will be that states are likely to outlaw exchange between it and their currencies, like China did.

Other than that you're mainly blaming Bitcoin for crimes commited using it, as they wouldn't otherwise occur.

The policy of central banks maintaining a low rate of inflation is not so great if you're not clever enough to do trading in high return, high risk investments. As it is, it is currently very difficult to save money as savings accounts do not pay enough to beat inflation.

In theory a currency with a fixed supply would deflate at exactly the rate of economic growth, which would be harmless and beneficial for savers.

101:

Charlie @ 23
Libertarianism, like Leninism, is an attractive, internally consistent
ideology which provides a prescription for achieving a utopian society
populated entirely by frictionless perfectly spherical human beings.
Or so it is said ....

102:

osmosis @ 29
What, pray is a "free" market?
They are all rigged, in favour of the biggest & most corrupt.
BitCoin is even MORE rigged in favour of the ....
That is the problem, as stated by OGH.
Now what?

103:

Looking at your classification of what should and should not be taxed, I am not sure that I want to find out the consequences of your proposals.

reform tax laws so we actually tax the things that make sense - land and physical property. there is no reason to tax income, financial transactions, sales, gifts, inheritance, capital gain, alcohol/tobacco consumption, gambling, import and export etc. (you name it). It makes no sense. Yes, you're correct that land and physical property are a different sort of resource, but I have heard enough stories of the ills arising from a dependence on land taxes.

I'm not sure just what you mean by "property". Is it limited to assets fixed to the land, such as a house, or does it (at the other extreme) include the pen in my pocket? Are they to be taxed on acquisition, or is there an annual payment?

Frankly, having had to deal with some of this sort of thing at the bookkeeping level, I'd rather have an income tax system, as a matter of practical administration. How do you even assess the value of real estate, just as a starting question.

There's quite a few points you make which don't sound crazy. They can be argued about. But when you play your final card, you suddenly look as honest as the poker player who produces five aces.

104:

Assumption:
The "miners" are physically situated inside the USA's domains. Even of they are now, they won't be if what you suggest looks like happening .../.

105:

My hats off to you for having the vast brass stones to fight libertarians on the internet. I agree completely that BitCoin is ridiculous. I especially wonder if the whole thing is funded on a myopic nerd-boy assumption that people are ready to (and should) trust algorithms rather than governments.

I can't really expand any of my substanitial thoughts now, but let me leave my favorite literary-bitcoin conundrum here:

Was Ellen Ullman's cypherpunk boyfriend described in her amazing memoir "Close to the Machine," a proto-bitcoin guy? She describes him working on crypto-currency...

106:

@ 40
I think OGH won't like you when he returns - also, please read my quote # 100 on Libertarianism?

107:

@ 53
Your loony-libertarianism is showing:
2) reform tax laws so we actually tax the things that make sense - land and physical property. there is no reason to tax ...
Some of us would disagree, profoundly with that statement.
I would have to leave my home of 65 years, because I could not afford the tx. You know what you can do with your suggestion.
Also, income tax is PROGRESSIVE - the more you earn the more you pay.

108:

I actually don't have any particular issue with the underlying concept behind Bitcoin; in fact I think at least two of Charlie's points (the underlying ideological basis being dubious at best and the mechanism for determining its worth making no sense whatsoever) could be just as fairly applied to the twenty-pound note I just exchanged for some Christmas spirit. (From the off-license.)

But where it's gone wrong, I feel, is that nearly everyone doing anything serious with it appear to be using it as a get-rich-quick cheme instead of an actual currency. See the ridiculously unpredictable exchange rate.

109:

The point about power consumption may be true. The difference seems rather too large to be plausible, but I'm no expert. And I have no idea if you are. So, cite please.

And what does a suitable ASIC cost? I know, in a general sense, what you're talking about. And, when I Googled on ASIC, the top of the list was an advert for a company offering to do the work for you at $10.18 per gigahash. Which is a heck of a lot of kWh. (Watts oer gigahash is a useless number to quote.)

60 kWh per gigahash is crazy (and how many gigahashes per BtC?), so we can assume the energy cost is much less than $10. Allow for profit, too. But that company offers deals of up to 1000 gigahashes per second.

(If it were joules per gigahash I could get somewhere with your figures.)

110:

@103

Maybe they won’t be in the US, but they have to be _somewhere_. It would be an unusual government that wouldn’t want its cut.

111:

"when the tax revenue base implodes and takes down the social security net, medicare/medicaid/the NHS, pensions, police/fire/ambulance provisions, road repairs, and so on."

It also takes down the state's ability to wage illegal wars and spy on its citizens. This would be a good thing.

112:

How about a pure purchase tax? The only way I've come up with of fiddling that is to pay actual cash for part of $item, and sooner or later the fact that someone's got more money than their profit on sales explains has got to show up.

113:

Which implies that you see a certain equivalence or perhaps prioritise the spying and war thing. Of course the biggest country to engage in such also has the lease social safety nets...

114:

Sataoshi / nakamoto
What is this "god" of which you speak?
Undetectable by any means, IIRC.
Charlie reminded you that : WE ARE NOT IN THE USSA, okay?
Please try to remember this - that your parochial state's rules are not universal.

Unless, of course, you are just trolling, in which case - have a nice day!

115:

@ 110
"A good thing"
Really - no spying, no illegal wars, & no state at all, merely what Hobbes referred to as "And in that state of Nature..."

Like Charlie said, excanging a hangnail for, euw....

I suggest your priorities are skewed

116:

The linked article does not measure the Gini coefficient for the Bitcoin economy. It looks at the distribution of Bitcoin amongst wallets. There is not a one-to-one mapping of wallets to humans. One large wallet may serve thousands of people, for instance - a trading exchange with thousands of clients. And multiple wallets may be owned by an individual, as a method of reducing the risk of loss.

I know of no study that measures the real Gini coefficient of the Bitcoin economy. I have no doubt that there are individuals with great personal Bitcoin fortunes, but have no way of knowing how that compares with the traditional economy. I am also sure that there are a multitude of Bitpaupers, folks who, wanting to see what it was all about, went to a Bitcoin faucet and solved captchas for a pittance.

Just to say where I come from on the Bitcoin issue: I'm a practical, selfish American lefty, that is, I prefer some collective social welfare to the idea of having to defend the homestead myself against the hungry masses. I generally favor Bitcoin. I can find nothing in Bitcoin that is incompatible with modern finance and governance except that it removes the capacity of a government to print more money. And it provides a benefit of a fully transparent ledger of all transactions everywhere.

There is a significant segment of the Bitcoin _culture_ that runs libertarian, but that doesn't make _Bitcoin_ a libertarian tool. For comparison consider the substantial intersection between libertarians and proponents of Universal Basic Income.

117:

I think you are heading into a spherical economist mode of thinking. A limited supply of digital tokens would only work if they were used for every transaction, so that the value of everything could be counted. And that would mean it would have to be the only medium of exchange. No barter, and no gifts. No unwanted Christmas presents may be sold on eBay.

No arbitrage.

Which means no financial markets.

Your idea depends on perpetually perfect knowledge, which is impossible, as we understand physics today.

118:

If I may derail the conversation for a moment, I'd like to point out that OGH has refuted Godwin's Law with that comment, to the point that he has won the argument (as Mr. Satoshi subsequent posts clearly show) while mentioning a certain Charlie Chaplin lookalike from Austria.

119:

But, without the other elements, how many of us would be alive to experience the good thing?

120:

Full disclosure: I'm a card-carrying Libertarian.

I thought BitCoin was a bad idea. I did think it was a form of cognitive dissonance for my fellow libertarians to blast fiat currency as worthless paper, then embrace money that consists of nothing more than 1's and 0's. And what is to stop other private entities from designing their own currency systems at will? If BitCoin "works" today, somebody else would develop "ByteBuck" tomorrow, and perhaps "GigaCash" after that. Money ceases to have value when it is no longer scarce.

121:

Doesn't make much less sense than embracing currency that consists of rare, aesthetically pleasing but not ultimately very useful metal, though. Not if you're deluding yourself it's any less of a fiat currency, anyway.

122:

Did they nsa pay you to stop fighting for electronic freedom?

You could always ask my co-author Cory Doctorow ...

123:

Okay, time for a little thought experiment.

A little over half of all possible BTC have been mined so far. Imagine those who currently hold those BTC just hold onto them until all BTC have been mined, and don't do any further mining. They just sit on their massively deflationary asset, like you DO when you have a massively deflationary asset.

Now imagine that everyone, every single person on Earth, simultaneously decides to go with BtC for their transactions. Since the people holding the current half are just sitting on them, the rest of the world has to mine, distribute, and then use the remaining half of the BTC space, to run the world's economy.

Let's ignore the USD-BTC or whatever other conversion rate for the moment. Assume that by the time the BTC space is mined out, the entire world economy is being denominated entirely in BTC itself.

Now, at this point, the holders of the first half of the BTC supply wake up from their hibernation, and realize that their dream has come true: They own half of the ENTIRE WORLD'S money supply.

In this sense, BTC bugs and goldbugs are pretty much hoping for the same thing. If their little pet boutique currency becomes a dominant currency, then the demand for the currency goes WAY up, making it massively deflationary even beyond any internal deflationary nature the currency may have baked in. They are hoping for everyone else to get suckered into the market they have already stockpiled.

This hasn't really happened with BTC. If you think the BTC price trajectory has been stratospheric so far, imagine what it would look like if it was actually taken seriously and it turned into a real currency, thus requiring tens/hundreds/thousands of millions of people to buy into it, in order to have some to use as currency. Imagine what that kind of buying pressure would do to the USD (or whatever) to BTC conversion price.

It's the hope of roping in those tens/hundreds/thousands-of-millions of suckers that is keeping BTC-bugs warm at night.

124:

I do have an O-level in economics.

I reckon it puts me several steps ahead of some of the unfamiliar comment writers here.

What I learned about statistics and probability also puts me ahead of some politicians. And remember, a Smith & Wesson beats five aces.

125:

Pretty much all currency has no real value in itself, the value comes from other people being willing to trade things for it. It problem comes with money supply, and the ability to increase it by fiat. Libertarians have concerns with governments being able to create money at will, and feel that gold is more reliable since it is difficult to increase the supply rapidly. Though that has problems of its own, which we saw in the US in the 19th century with the whole gold vs. silver debate.

126:

I suggest to you that the people of Iraq and Afghanistan, not to mention the families of all the western combatants who dies or were maimed, would be more than happy to make that trade.

127:

I'm a libertarian, and I'm one of those who thinks the hype around bitcoin is silly. I'm all for private currencies, but the price of bitcoin is nonsense - pure speculation.

And since you mention basic income, I'm one of the libertarians who supports that too, for various reasons. Though I know others who think it is the worst idea ever.

128:

One interesting angle is that the time required to confirm a Bitcoin transaction as part of the blockchain imposes a time limit on transactions of the kind envisaged by a Tobin tax - I wonder about the ratio of wasteful computation used in bitcoin mining compared to high speed trading in conventional stock and currency markets.
Looking at Coinbase, the VC-backed bitcoin to dollars exchange company, they make it about as easy to sign up as etrade - somewhat cumbersome, and requiring bank and credit card details, as well as a US SSN. They also have a $5 spiff for getting others to sign up, following the original Paypal idea. Thing is, both the spiff and the trading threshold for winning it ($100) are denominated in US dollars, so they aren't even using Bitcoin as a currency of account themselves.

129:

Possibly more than are alive today, if we allow for the millions slaughtered in the 20th century by governments.

130:

Well, they will run out of coins to mine in the foreseeable future, correct? And I think the inherently deflationary nature of bitcoins will kill them off as anything other than an exchange medium, and that will also keep them volatile. And it seems that they can be tracked.

What I would worry about is the next one, something that isn't inherently deflationary (perhaps mildly inflationary?), is anonymous (as long as you don't spend the same unit twice (worked out so long ago the patents are probably expired by now), etc.

Frankly, I expect a better grade of rant from you, even if I think you are wrong. Or will the current trilogy put you into an even darker mood? :-) Please keep up the good *interesting* work!

131:

The problem is that the banks create money by fiat too, so which is to be master? So far it's the banks most of the time, which doesn't help normal people much.

132:

Bitcoin is a piece of software which tries to implement a particular SFnal future. One in which the world currency is de-centralized, deflationary, and all early bitcoin adopters own their own planetoids, and all visitors are automatically charged for the air they breath.

Thing is, the real world is more complicated than that. Assuming Bitcoin did manage to become an important currency, countries would naturally try to regulate it. In 30 years, by the time bitcoin mining has slowed right down the legal system will be fully caught up to the internet.

Bitcoin tries to make its code the law (as Lessig used to say), but the law can certainly affect its code.

The law could, for example, require that bitcoin be changed to stop increasing the difficulty of mining new blocks. Then bitcoin is suddenly an inflationary currency. This would be a hard fork in the block
chain, but one enforced by financial regulators. Miners would be tracked down and forced to comply. Some would perhaps go underground and run the deflationary bitcoin network on TOR hidden services. Lots of possible ways
it could play out.

That's only one scenario, covering one of the many problems with Bitcoin. So it seems to me that Bitcoin should be a gold mine for Science Fiction
authors, if nothing else..

133:

Beanie babies.

134:

If BitCoin "works" today, somebody else would develop "ByteBuck" tomorrow, and perhaps "GigaCash" after that.

You won't believe me...

135:

So it seems to me that Bitcoin should be a gold mine for Science Fiction
authors, if nothing else..

Not read "Neptune's Brood" yet, have you?

(It's not Bitcoin; it's a different type of cryptocurrency, designed to promote a different political agenda -- intsterstellar colonization in a no-FTL, no-relativistic-travel universe.)

136:

Fair question.

First let me say that i'm no expert on taxes and related laws so consider this as my amateur opinion derived from the current state of affairs and i'm open to constructive critique.

Also let me apologize to other readers for this slightly offtopic comment as i thing it is only remotely related to bitcoin.

When thinking about how to make a good tax system i consider several points: 1) what is the purpose of taxes, 2) how much should we pay and 3) how to best collect them.

ad 1) The main purpose of tax system should be IMO to prevent few people from monopolizing scarce resources such as land, natural resources, air frequencies etc. If you own such resources, you should utilize them for the benefit of the whole society, earn money for the services you provide using them and pay taxes. If you fail to earn enough you should sell the resources to someone else as it means that you are not using them effectively enough.
Second purpose is to fund government and services it provides. This can also be accomplished by other means (state owned companies come to mind)
Third purpose is to (to some extent) help decrease differences in wealth distribution among people.

ad 2) From the purposes above it follows that i support progressive tax. But how high should it be exactly? I can't answer that. I'd like effective government which provides socialized education, healthcare, welfare, which supports culture and sport activities and other more basic services like infrastructure building, law enforcement, justice system, defense etc. All of this costs something but with the economic growth of the last decades (before the 2008 crisis) i think we could afford reasonable levels of those services with 25%-35% income tax. The problem today is that there is no tax limit. Governments are constantly increasing taxes and introducing new taxes to compensate for their own inefficiencies, the lack of economic growth and their inability to properly collect taxes. I think that government fiscal responsibility should be part of the constitution. If government fails to reach balanced budget it should decrease its own spending and not increase taxes.

ad 3) There should be simple way to determine how much taxes everyone needs to pay. System we have today is far from that. It basically depends on the honesty of every citizen to report his income and tax it. Of course the tax office do some checks so if you buy a house with no reported income they'll probably go after you. But generally for large companies it is very easy to avoid paying taxes using tax heavens, shell companies, hollywood accounting, paying for bogus consultant services, using bitcoin etc. This is IMO not sustainable and fair system.
Also there are too many taxes. From ethical point of view taxes are very questionable. I can agree to pay honest tax from my income or property, but taxing my habits like smoking or drinking? Or money transactions and sales? Or whatever random activity someone in the government dislikes? This is IMO too much.
I talked about scarce resources - the good thing about them is that they are scarce. Some central authority can keep track of them and their owners. If we payed taxes from them, they would be hard or impossible to avoid. The payment should be annual and progressive. Tax from land needed for personal living should be very low or even zero, but if you own big industrial complex you should pay much more. There could be other factors to determine the correct amount - for example how lucrative the resource is (land in countryside is cheaper than in city center etc.) But again, don't expect exact amounts from me, there are many things that must be considered and i don't imagine that i know them all.
Also i mentioned houses and other property in my previous post. That was probably a mistake as houses are no scarce resources, the land below them is. So the houses and other physical property (like the pen in your pocket you mentioned) don't fit well in my tax scheme and should be extempt:)

137:

I like my money slow, and my post-human women fast.

138:

Off-topic: Charlie, please bring Freya back. She was way funnier than Neptune's Brood protagonists.

139:

Curiously history does NOT support the assertion that the modern nation state is more violent; today you are far less likely to die by violence (state-administered or otherwise) than you were in the 18th century. The difference appears to be the ubiquity of violence in those days, arguably from the absence of a state enforcing its monopoly on the legitimate use of force. (Thank you, Herr Weber.)

It would appear then that a stateless society does not reduce violence but rather shifts violence from a relatively few incidents of mass-produced tragedies to many more artisanal, bespoke, hand-crafted tragedies. #HipsterCrime

-- Steve

140:

Charlie,
You must like stirring up the hornets nest. Between this and your comments on space colonization, I'm surprised the Promethean awards even list your books. Or are you setting this up as a honeypot/tar-baby for the libertarians, crypto currency folks and space colonization types?

Anyway, to all those that said bitcoin mining via malware isn't that profitable (comments 16, 28, 42 and 53), have you ever heard the phrase "stolen goods are never sold at a loss?" Because comment 86 got it right - they may make pennies, but its free to the malware director and they're working on a large scale.

141:

I agree with you mostly, but want to point out that there is no need to change the modern western taxation process in any way to accommodate the use of Bitcoin in place of government issued currency.

Imagine if Bitcoin were "The Coin of the Realm", that is, you are paid in it and you use it for most of your purchases. My government would simply require my employer to withhold a percentage prior to the delivery of my pay and to provide accurate payroll books to the revenue service on pain of legal action. Far easier for a government to regulate a thousand companies than audit a million taxpayers.

This is exactly as it is done today with government-issued currency.

And for the minority that work "off the books", a system of self-reporting, audits and penalties for tax cheats will suffice.

Exactly as it is done today with cash-only workers.

142:

I've had reservations about Bitcoin, mostly related to the long term issues of deflationary currency as medium of exchange, however, it may actually make sense as a store of value. I am interested in the development of demurrage currencies like Freicoin, although I think the problematic thing would would be in mass adoption. Bitcoin may have enough advantages (first mover, transaction cost, non-fiat) to offset its theoretical structural disadvantage. I guess we'll have to see.

Regarding the energy costs of mining, the current lowest-economically-feasible (calculated by the ability to breakeven from mining) ASIC is 1.5W/GH and the current best is 0.6W/GH - the calculations you link are based on 650W/GH so off by a factor of 400-1000+. It's probably not that hard and I don't think anyone has really plugged in the numbers into figuring out power costs / transaction, but as mentioned in a previous comment, it's *probably* less carbon intensive than how money is currently shipped around.

The flip side of all this mining compute power is that it's economically undesirable to use zombie networks for mining vs other more profitable ventures.

A bunch of your issues against Bitcoin revolve around anonymity/lack of regulation, but I think the reality of the situation is very different from what you lay out.

It's almost impossible to get anonymous bitcoins: mining connected to a mining pool on Tor, or exchanging cash via LocalBitcoins, again w/ Tor. These are dependent mostly on the (questionably) anonymous properties of Tor and cash. If you are acquiring Bitcoin via an exchange like Coinbase, Bitstamp, etc you are pretty much required to hook up your bank account/provide identification, and reported to FinCEN or whatever your local regulatory agency is. What we're seeing now (like the China regulation you started out with!) is increasing regulation of BTC/local currency exchange.

Bitcoin-to-Bitcoin transactions, by protocol, are completely traceable as every single transaction is stored in the blockchain forever. As we've seen, once there are known addresses or transactions it's trivial to unwind or do network analysis to identify wallets, especially for government/regulatory agencies (or those engaging in huge dragnet surveillance/digital intrusion operations, *ahem*).

The same techniques used to bring down something like Silk Road and things like existing CP operations will be just as effective against other illegal markets. These techniques are actually aided by the aforementioned traceability aspects of Bitcoin and probably one of the reasons that LE/govt is supportive of Bitcoin adoption vs truly anonymous P2P cryptocurrencies like Zerocoin.

I suppose that Bitcoin could be used for large scale international money laundering, assuming one can easily spend BTC or convert BTC into currency sans regulation (again, unlikely anywhere except where currency conversion wouldn't be a problem in the first place) but you'd already need to have an infrastructure for moving/distributing a lot of off-the-books cash and the wherewithal to create a huge mining operation (which would still be traceable without a lot of opsec) and I don't think Bitcoin is any more conducive to that than any other global digital currency would be.

To me, Bitcoin-like (P2P cryptocurrencies) do have issues - can Proof of Stake work better than Proof of work? (ppcoin) Can PoW be useful computation? (see primecoin, but imagine if mining/transaction verification was linked to say Folding at Home/protein discovery) Can cryptocurrency be linked in a way that's internal and resistant-to-gaming to something like energy input or usage or can it otherwise be stabilized when bootstrapped?

I think the positive thing about Bitcoin is both in driving a big interest in analysis of the fundamental qualities people want in a currency, and providing a huge-step-up in terms of a platform/framework for creating/testing out different cryptocurrencies.

To me, Dogecoin points to the future - a world where it's ridiculously easy to instantiate and use semi-private Rushkoffian barter currencies, which nicely sidesteps a lot of the unsolved macro-economic issues.

143:

@110 You appear to be assuming a sudden transition to a flat rate property tax system. Start with a low rate tax on real estate owned plus a large allowance (a few million or so) applicable only to your primary residence and associated farmland. Every year raise the real estate tax rate and the income tax personal allowance. Lower the allowance for your personal residence as property prices fall.

While income tax is in theory progressive it is also much easier to game than a property tax. Beyond a certain point tax avoidance turns it regressive.

144:

More to the point, it's fundamentally wrong. The basic purpose of taxation is to fund government expenditure, so any equitable system of taxation should raise no more than is required to balance the budget (after allowing for interest and repayments on borrowings).

145:

While bitcoin supporters tend to hate the idea of inflation, there are others coins that have inflation built in to encourage spending -- a kind of progressive version of bitcoin.

Here's a random example of a coin designed around a specific economic philosophy:

>Unlike Bitcoin, Freicoin has a demurrage fee that ensures its circulation and bearers of the currency pay this fee automatically. This demurrage fee was proposed by Silvio Gesell to eliminate the privileged position held by money compared with capital goods, which is the underlying cause of the boom/bust business cycle and the entrenchment of the financial elite, and has been tested several times with positive results.
http://freico.in/

(no idea if that has merit but it was the one that stuck in my head because it was so clearly articulated on their homepage)

146:

My two cents -

There's something fundamentally wrong in using an object of speculation as the exchange currency, in that when it's going deflationary the velocity slows or stops as people start speculating rather than spending it.

For a *speculative item* that's great behavior. As the exchange unit in a real economic system, where the value *to the system and its participants* is in the velocity of value and not its static value, it's a horrible mistake.

I've had this argument with people who are serious Libertarian to the Extropian extreme, and most don't get it, and the ones that do tend to be more concerned with the political agenda Bitcoin was aimed at (I think, and Charlie is suggesting). I think this makes that set of people incompetent to plan an economy 2.0.

There may well be deeper economist-capable serious L's out there. Szabo and May aren't on the list of those I've had this discussion with.

147:

... this seems to be an even better troll bait than "cult of justice"!

Thanks for this rant. Up to now I was open-minded and mildly curious about Bitcoin; after reading this I think Bitcoin is obsolete. Main point that did it for me is that Bitcoin appears to promote hoarding instead of getting things done. IMHO money should undergo inflation at the same rate as society produces goods.

148:

I'm not convinced by that argument either. I can't find the original source now :-( but I've seen it argued that, since the invention of income tax, inflation is a mechanism whereby governments take more of your money, whilst pretending to take less. See also "fiscal drag" in this context.

149:

The basic purpose of taxation is to fund government expenditure

I don't think so. The purpose of taxation is suppress certain economic behavior and favor other. That's way it's called "Steuer" in German, which means "steer". It's also a way to redistribute wealth.

150:

Not according to the entire history of taxation of the UK, what with medieval parliaments voting kings the money to keep him in the correct style and defend the nation, through to income taxes being introduced to fight Napoleon. The idea of using taxes to change behaviour is comparatively new, although I think it was probably so used for some spirits back in the 18/19th centuries.
But anyway, both definitions are not mutually exclusive. The UK government currently collects taxes so that it can spend it on people's pensions, for instance.

151:

Growing and selling narcotics is economic activity. By your argument any sensible government should allow and regulate this activity since only by doing so can they tax, and hence direct it.

Also, by your argument, there is nothing wrong with a government running a budget/taxation surplus simply in order to build up reserves of capital.

152:

Charlie,

remember your bad dream about the "The Ruling Party" ?

Do you think one of them will give a shit (redact if you like) about the carbon footprint of bitcoin mining, contemplating this amusing fact on the wooden planks on his yacht near St.Tropez ? Do you think the nsa/gchq is concerned about mining botnets while hacking your BT routers ? In another corner some traders from a shadow bank, wondering about a "utter lack of regulation". And of course our corrupt governments, always longing for "stable governance". All of them feasting on money backed by seven billion happy believers...

I don't get it - is your rant an appeal to the greater good ?

Stefan

153:

Andreas Vox writes:
I don't think so. The purpose of taxation is suppress certain economic behavior and favor other. That's way it's called "Steuer" in German, which means "steer". It's also a way to redistribute wealth.

It has many, many possible purposes, and people tend to see the ones they disagree with when they're objecting to it. Liberals scream about wars funded, and tax breaks for oil companies; conservatives, about wealth transfer to the poor etc.

Until the recent medicare increases, California was roughly 4 parts school funding, 1 part prison funding, 1 part roads funding, 1 part medicare, 1 part everything else. One can have detail arguments across the liberal-conservative-libertarian spectra about any parts of those, but those are all widely acknowledged to be legitimate things the government should fund.

154:

Methinks thou dost protest a wee bit too much.

Several of the contentions seem to fit just as well with cash. It has long been preferable to do dubious things like tax evasion and paying for immoral things (whether pornography, sexual favours or hit-people) using cash. I kind of doubt that Bitcoin is, in practice, as anonymous as cash.

The complaints about energy footprint don't seem to fit well with what's actually going on. It would be illogical for people to be paying for hardware (ASICs and FPGAs) for Bitcoin mining if they were paying more for electricity than they were collecting from selling Bitcoin. So it appears to me that something's off with the numbers here. The ASIC-based miners seem to get several orders of magnitude of improved hash rates, which seems like it isn't being accounted for.

Further, I don't think that the "stolen computing infrastructure" part is of much ongoing relevance. The escalation of ASIC/FPGA-based mining makes botnets decreasingly effective. They might be collecting a few cents per day per bot, but they can't be getting more than a few Mhashes/second per bot, and the ASIC-based systems get enough orders of magnitude more hashes that I suspect that the aggregations aren't going to be terribly effective. If Bitcoin difficulty rates go up further, that drops the profitability from pennies per day to pennies per year, and will make a botnet builder look for activities with higher payoffs. At some point, forwarding spam is more worthwhile.

155:

My thoughts can be summed up as:

1) Developments towards untraceable/untaxable/etc. mediums of exchange are generally a good thing - in the tug of war that is society. Governments, the powerful, and the rich (which tend to end up being the same people) tend towards draconian control and oversight which both stifles any real freedom and turns everyone into practical slaves. Anything that unsettles them helps to slow that process; maybe even reverse. This is a good thing, no matter the strawman of OGH as to what might happen if it went all the way in the other direction.

2) Because of constrained nature of bitcoins, the people who 'mined' early gained value that now is out of all proportion to the 'work' they did. Since they tended to be techies, and the people piling in now tend to be libtards, that constitutes a transfer of cold hard cash from the libtards to the techies. Eventually either the government will screw up bitcoins, or people will realise there is no inherent value (tulips) and the libtards will end up holding nothing. Thus I approve of them giving the techies their money in exchange for nothing.

Here's hoping for a new bitcoin replacement, but one that is actually connected to the *creation* of value (OGH played with it as 'reputation') rather than the con which is money creation by banks and government fiat. Now THAT would be disruptive - unseating bankers from their place wallowing in the trough...

156:

Growing and selling narcotics is economic activity. By your argument any sensible government should allow and regulate this activity since only by doing so can they tax, and hence direct it.

I think there are other good reasons why it's a good idea to legalize narcotics and regulate the market. I would use a more direct regulation though (licensed sellers, procedures to bring medical help to users), not through taxes.


Also, by your argument, there is nothing wrong with a government running a budget/taxation surplus simply in order to build up reserves of capital.

Why would a democratic government want to have a budget surplus? Any gains in the public sector are balanced by losses in the private sector, and people who experience losses are poor voters. Government debt means private wealth. If you wish to level that, it's easier to allow inflation.

157:
If you get thousands or millions of machines to do something inefficiently, it starts to get much more efficient.
Actually, it's plain economical theory.


At current hash/s difficulty, the average mom-n-pop desktop computer infected with malware should yield about a few cents month in average. And the computer would be pretty much visibly infected and locked up at full cycle, i.e. quickly diagnosed, brought to the nearest kid without a "I will not fix your computer" tee-shirt, and cleaned out.


The question becomes: will this botnet-controlled computer be worth more to me as a bitcoin miner or as a spambot?

158:

Developments towards untraceable/untaxable/etc. mediums of exchange are generally a good thing - in the tug of war that is society.

I think your understanding of society is lacking. Societies tend to be a little more complex than a "tug of war". Also, why do you think taxes are evil? Are you against roads, schools and social security? What about laws? Do you want to see them enforced?

159:

Not all heat is waisted. It's -10C in Montreal right now. A mining rig help to heat the house.

160:

Oh there are so many many many many many problems with just property taxes... not least of which you stop owning property, crash the property market and do everything with long term leases...

Plus not everybody owns property, and it makes owning property in retirement practically impossible.

Taxes should be on economic activity, anything else is really bollocks.

I'm with Charlie - it's a shiny techno form of gold buggery and just as stupid.

161:

Also, by your argument, there is nothing wrong with a government running a budget/taxation surplus simply in order to build up reserves of capital.

If you're stupid enough to have a system whereby the government can't borrow or print money itself, then the prudent thing to do is for a government to run up reserves of capital so they can deal with emergencies. Anything else would be a potential problem.

One of the problems we're facing is we're in a recession after decades of imbecilic fiscal management during which trillions of dollars have been transferred to smaller and smaller numbers of private citizens all while reducing the ability of the governments to deal with collapses in demand.

162:

After a bit of thought:-
1) Agreed, but I think the argument about taxes still stands (actually, making it a source of tax revenue rather than a cost in terms of police time etc works for both our arguments).

2) I'm not suggesting that a democratic government necessarily wants to have a budget surplus; I'm saying that if your argument holds then they may be forced to run one in order to direct the economy the way they want even though they acknowledge the negatives of them doing so.

163:

Wait, aren't the reliance on property taxes in local government in the USA causing problems with stuff, e.g. school funding because the recession means property is worth less or people have less money to pay, and various other things, basically you end up with cratering funding for schools.

164:

Since you're quoting me, you're "preaching at the choir"; Andreas is the one who's arguing for a system where taxation is used as a means of "punishing bad activity" rather than of funding spending programmes. That's not to say hat I believe that accumulating more and more when you atlready have more than you can ever spend short of giving it away is a moral thing to do.

165:

Well, I'm actually ok with both. Imposing high taxes on things you want to stop people doing does work. Tobacco, alcohol, etc...

But then my libertarian (with a very tiny tiny l) side comes out and I think it would make sense to prohibit less things and tax and regulate them instead.

166:

RE:It's not Bitcoin; it's a different type of cryptocurrency, designed to promote a different political agenda -- intsterstellar colonization in a no-FTL, no-relativistic-travel universe.

I think you're wrong about your own book Charlie, I am 99% certain that the word bitcoin is used in Neptunes Brood(but in a generic sense, as in "a bitcoin", not Bitcoin.

I only have the dead tree edition so I can't just do a string search, but maybe you can do it.

Also I've recently heard of an(maybe dodgy depending on your opinion of Foreign exchange controls)interesting use-case for Bitcoin. A friend invited me to come with him to a Bitcoin Meetup and there I met a guy who said that he used Bitcoin to bypass his countries exchange controls to get all his money out after he emigrated and just put it into a bank right here(apparently the bank just asked him for proof that it was legitimately earned and after that was established, said "OK, it's not our job to enforce other countries export controls". I'm still a bit skeptical, but looking a the policies of the various Bitcoin exchanges, there don't appear to be any show-stoppers. Anyone care to comment?

167:

The real fun with bitcoins is once you get over the whole "it's a new currency!" sham and get to the meat of it: it's a commodity.

Made of a hash-string.

That can only be "sold" and converted to actual money by selling to someone else who believes the "bitcoin dream".

Which means it's functionally no different from a ponzi scheme at the moment.

The hope bitcoiners seem to harbour is that one day bitcoin will be usuable for all the things they want to buy aside from all the child prostitute drug-mule assassins they're (presumably) currently buying the stuff, which paints the most hilarious picture coming out of the concept of bitcoins.

You see, the people in this thread saying "it's about time buttcoiners learned" are ignorant of the way that bitcoin crashes about once or so a month - back in april it bottomed out at $10 from a high of a few hundred, and this halving of its total "price" is in that trend; by the end of the week it'll probably spike up to 75% of its old price, then crash even harder, as new suckers buy into bitcoins after this "crash", which in turn will send up the price of buying bitcoins AGAIN, then people will try to cash out, find it hard to do so because everyone's waiting for a low to hop onboard the bitcoin wagon, and the price will drop further than it is now due to that lack of demand and all the burnt investors will start slowly selling out to new suckers so as to divest themselves of the sudden exposure to risk their bitcoin wallet represents.

So try to imagine a real currency that was that volatile; You get up on sunday with a wallet with 5 bitcoins in it and can buy a car for 2 bitcoins, by friday the car dealer pays the salesman who sold the car his 50% commission of 1 bitcoin, and on saturday the salesman who sold the car is made homeless because 1 bitcoin can't buy a cup of tea in a cheap cafe let alone pay his backrent.

168:

Did the bank BUY the bitcoins off him or something? The problem, from an investor's standpoint, with bitcoins is that you can only "turn" it into real money by convincing someone to buy your bitcoins FOR real money.

It's why a lot of bitcoiners are such fervent evangelists, they NEED you to buy bitcoins off them to make any money, otherwise they're just people with a load of useless hash-strings and less money than they started with.

169:

Mistress, deliver us from popular etymologies...

Actually, the German term for steering would be "das Steuer", e.g. a neutral substantive, while taxations is "die Steuer", a feminine. Though there might be variantly gendered variants of both I'm not aware of.

http://de.wiktionary.org/wiki/Steuer

If you follow some of the links in this article, you arrive at Grimm's dictionary, where both have seperate entries, e.g. "die Steuer"

http://woerterbuchnetz.de/DWB/?sigle=DWB&mode=Vernetzung&lemid=GS46092

and "das Steuer"

http://woerterbuchnetz.de/DWB/?sigle=DWB&mode=Vernetzung&lemid=GS46093

Actually, both go back to the Old High German stiurna, which meant something like "help, buttress, carrying structure, pale, support". You have some remnants of this in the German verb "beisteuern", e.g. "contribute".

So the German term "die Steuer" is more about giving financial support to someone.

And as already said, may the mistress deliver us from wrong but "eingängigen"[1] etymologies.

[1] Sorry to say, Grimm's doesn't say if this is related to "der Eingang", e.g. "intrance", or "ein Gang", e.g. "one Way", e.g. somewhat stubborn, simple...

170:

One nitpick: bitcoin transactions aren't hard to trace. In fact, they are extremely easy to trace (...to addresses, which can usually be trivially associated with people or organizations), because the entire history is in a public file that everybody with a bitcoin implementation has a copy of. It's just that a lot of people (some of whom are journalists, and most of whom either don't have a strong background in cryptography or haven't paid much attention to the specs) believe it to be hard to trace. As a result, people who would otherwise be buying or selling illegal services with difficult-to-trace bills or coins are instead essentially writing their entire transaction history into the public domain and broadcasting it to the world. As soon as law enforcement gets a bit more hip to the mechanics of it, I suspect parsing the blockchain to track down attempted money laundering and to track down the sale of narcotics and child porn will become commonplace (since it's much easier to do than other mechanisms of tracing the flow of funds).

As for everything else you said -- I can't really disagree, fundamentally.

171:

Honestly BtC was somewhat acceptable to me when I started hearing the "it's a commodity" retort from the BtC zealots. Problem is: they use that argument (or imply it) and then a mere few minutes later tout Coinbase as the economical messiah - which treats BtC as a currency.

The problem with us computer nerds is that we have this false belief that being a nerd in this industry qualifies you as one in another. Sadly, it doesn't.

After acknowledging my general ignorance, the bare basics I learnt in high school told me that one thing a currency should strive to be is representative of the volume of an economy ("volume" basically means "number of transactions" for the uneducated). BtC is too volatile to represent any form of transaction; in fact the only volume I believe it is representing is that of our greed.

Either way I have seen more people agreeing with you in the comments than bigots (I am sure more bigots will be arriving shortly though), which gives me some hope in the human race.

172:

For fun, calculate what the inflation rate has to be for a currency to lose half it's value in a 24-hour period. Lets just say that Zimbabwe and the Weimar Republic should no longer be the (ahem) gold standards for runaway inflation.

I dono. I have two 500,000,000 dollar Zimbabwe notes pinned above my desk. They came with expiration dates. :)

173:

A significant issue with BtC is that the transfer points between the Bitcoin world and the 'regular economy' are extremely susceptible to DDOS (and associated manipulation) due to their small size and lack of government sanction (while people can and have attempted to DDOS the NYSE, they piss off a lot of economically and politically powerful people when they do so, plus the NYSE has way more resources than a typical BtC exchange to mitigate attacks).

This means that the barrier to entry for market manipulation is way lower than it is to manipulate, say, the international copper market.

174:

I'm not sure bitcoin is deflationary in the way you state. Sure, the number of bitcoins is limited. But there's nothing to stop anyone from setting up a similar new virtual currency, called say bitcojn_1. Once this exists, the only advantage bitcoin has over bitcoin_1 is that bitcoin was there first. But since one would be able to trade bitcoin_1s for bitcoins, the new bitcoin_1s can be used for anything that bitcoins can be used for. The only parameter would be the bitcoin/bitcoin_1 exchange rate, and since the 2 currencies are identical (in terms of total number that can exist etc) why should this not ultimately tend to 1:1? But then the same holds for bitcoin_2....

I wrote the above before I read #134 by finagi... At the moment I see bitcoin is at $522 while Junkcoin stands at one $0.0083. Maybe the latter should have chosen a more appealing name.

175:

Did the bank BUY the bitcoins off him or something? The problem, from an investor's standpoint, with bitcoins is that you can only "turn" it into real money by convincing someone to buy your bitcoins FOR real money.
He sold it at a Bitcoin exchange of course, but when the money was deposited into his bank account, it automatically triggered a laundering investigation because it was over $10000. Apparently he just told them that it was his money that he got out of the country via Bitcoin and provided proof(via bank statements, etc.) and they were fine with it. This is the bit that I find worthy of skepticism, but on the other hand, as far as I can tell, Western banks have no duty to enforce third world exchange controls

176:

This is a problem, but it goes way deeper than this. The BitCoin network itself is vulnerable to DDoS when it computes transactions. Bad mining nodes can insert spurious or incorrect transactions into the system; while they'll be caught and rolled back, a fairly small number of nodes could slow transaction confirmation down to a crawl. Any reasonably sized botnet could make BitCoin essentially unusable for everyone.

177:

Is Usenet archived properly anywhere? I know Google Groups bought out Deja, but every time I look there for old stuff I remember posting there are huge holes.

Me, I first got online in 1996 & gravitated fairly rapidly to alt.anarchism, where I promptly found myself embroiled in an argument with... Jim Bell, author of "Assassination Politics", referenced in one of the creepier links above. Well, I say 'argument' - my side of it consisted mainly of polite variations on "are you fucking kidding?" and "look at yourself!". It made an interesting introduction to the wide world of anarchists, or at least people who play them on the Internet.

178:

2) I'm not suggesting that a democratic government necessarily wants to have a budget surplus; I'm saying that if your argument holds then they may be forced to run one in order to direct the economy the way they want

Err, down? Budget surplus *drains* wealth from the private sector, unless you have a trade surplus that covers both state surplus and private sector gains.

179:

Strawman, Andreas Vox.

I never said I was against taxation, I said that those in governments/with money/in positions of power tend to reduce freedom and shift taxes onto the prols over time.

Imperfect though they are, bitcoins tend to pull in the other direction.

Since I consider it a dynamic equilibrium, I consider them a good thing - although a functioning democracy where the GMP couldn't get away with those tricks would be preferable. We don't live in that world.

180:

I guess you're right. I admit I just repeated something a teacher said once and didn't look it up :-)

181:

I said that those in governments/with money/in positions of power tend to reduce freedom and shift taxes onto the prols over time.

Imperfect though they are, bitcoins tend to pull in the other direction.

How would that happen? I doubt very much that Bitcoin will ever reduce the tax burden for Joe Worker; instead it's just another way for the rich&powerful to avoid taxes and launder money.

182:

'drains wealth' - that rather assumes that government activity is something of a zero sum game, and that a surplus isn't available to do things with that.

The logic of the Bush II tax cuts was the surplus was money belonging to the people that had to be paid back, except, there was a debt that needed paying down and then Bush II went on a spending spree that would make a drunken sailor blush.

The fact is the private sector can't handle collapses in demand as well as a government and having access to emergency funds above and beyond the cost of running a government can be useful.

Not to mention, there are multiplier effects of government spending that I've come to believe are, in fact, better than leaving it *all* up to the private sector.

183:

I agree completely here. I think we're arguing the same points but your quotes are better to link through :)

184:

My two favourite things about bitcoin -

+ MtGox apparently stands for Magic the Gathering online exchange

+ google results for selling bitcoin


Also I like the triffid/tulip thing. That's third.

But, you know, I thinks fans of bitcoin should keep buying them. Knock yersells out.

185:

Whenever I read anarchically minded people taking about how the victims of state violence around the world would of course much prefer some anarcho-capitalist world of ubiquitous firepower and all, I think of things like this picture of Kabul, Afghanistan, in 1972.

I grew up knowing a lot of refugees: boat people from Vietnam, the families of judges and administrators targeted by the big drug gangs in Columbia and Venezuela, the families of Chilean academicians targeted by Sendero Luminoso, fascists, or both, and so on. That Kabul scene is what they pretty much all wanted. The women aren't packing heat; they're unarmed and confident. The scene is clean. Everybody has clothes that fit and are in good condition. And in practice, this is the fruit of good government and a pretty strong measure of social order. The desired opposite, for lots of people, isn't the state removed but the state improved.

186:

I think pro-bitcoin and anti-bitcoin sentiments predicated on the idea that it will destroy governments by tax starvation are mistaken. The government doesn't need to track down your crypto-identity and unmask your transactions to get you for tax evasion, just show that your spending is inconsistent with declared income and savings. How can you pay for life's necessities and niceties with a large quantity of bitcoin? Surely no more easily than you can do so with cash in the local currency.

If you're renting housing the revenue service can bust you if you're not declaring the source of your ability to pay that rent. If you're buying real estate you have to pax property taxes in local currency and there's a public record of you owning it, so again they can make sure you are paying taxes annually and declaring the income that went to the original purchase.

Travel by train or plane creates records.

Buying, leasing, or renting a motor vehicle creates records.

Buying and maintaining insurance policies creates records.

Paying tuition creates records.

Paying for cable TV, internet access, phone service water, sewer, electricity, and natural gas utilities creates records.

Buying or selling stocks and bonds creates records.

Paying for medical services and prescription drugs creates records (if you are so unfortunate to live in a place where this is how things are done).

How much tax can a middle class or richer household dodge after we've placed housing, transportation, education, utilities, insurance, and investment in the normal economy as off limits for anonymous spending opportunities? All of life's major expenses leave records that can show you are spending more than you've declared in income. I'm left with comparatively minor expenses like groceries, gasoline, appliances, and clothing as opportunities to spend undeclared income. I'll still be paying sales tax on those things -- the only dodge is the payroll, income, or investment taxes that should have been paid on the money used to purchase the goods.

To get the undeclared buying power in the first place you either have to be a successful bitcoin speculator or conduct business in bitcoin with another tax dodger, aware that you will have no recourse to the law if the arrangement goes sour. Oh, and you have to get the BTC converted to your local currency without raising money laundering alerts, since most walk-in businesses don't accept BTC directly. That sounds like a large increase in risk and effort for a very modest reduction in taxation. I don't think it's a problem that should keep revenue officials awake at night.

187:

Wait, aren't the reliance on property taxes in local government in the USA causing problems with stuff, e.g. school funding because the recession means property is worth less or people have less money to pay, and various other things, basically you end up with cratering funding for schools.

Yes. But it's a bit more than that. Income taxes also go down. And local and state governments can't really print money. Yes they can issue bonds but if you are already in deep dodo then the bonds come at a high price and are a tough sell.

Which is why some will argue that the federal government should finance schools country wide. Which gives heart burn to some and at least pause to me. Refer back to CS's comment about trading a system with problems for one that appears all nice and shiny but not yet implemented.

Which leads others to say maybe we should break up the country. :) :(

Many in Texas are all for it. Many outside of California are all for them leaving. But they really don't get it.

Oh, well.

188:

I think you've got the realities of bitcoin right, but I think you've got the motivations of the creator(s) wrong. I don't think bitcoin was designed out of some Libertarian ideal. I think it was designed to appeal to those sensibilities, to make it easy to create some particularly zealous advocates, but I'm convinced the whole thing is a cynical money-making scheme at its heart. That's the only explanation for the extreme deflationary nature of bitcoins that makes sense to me. The creator(s) must have known that it would make it a terrible currency; it's a pretty huge disincentive to spend your money when you know it's going to be worth substantially more tomorrow. But moreover, bitcoins are going to fade out of existence entirely in not that long. Their intangible nature makes bitcoins really easy to entirely destroy, and since there's a cap on the number of bitcoins that will ever exist, they'll just dwindle away as they're lost in hard drive crashes or forgotten and destroyed in computer upgrades.

Meanwhile, the creator and very early adopters are swimming in the things from the early days when they were trivial to create and no one else was doing it. They were banking on enough suckers buying into the promises of their broken system to make them rich; sadly, they were right.

189:

The Bitcoin network collects a small fee for each transaction, paid to the miners that maintain the network. Bring plenty of money if you are planning on a DDoS attack.

190:

Nope. It's just that everytime an purported etymology is used as an argument, my spider sense goes. Having some close family members into the teaching persuasion going off about some plain or social pedagogue chanting words or purporting etymologies and thinking it explains something about their hidden meaning makes for us thinking it as a practice little above dancing your name. Barely.

Oh, it also makes for "pedagogue" itself becoming something of an insult with said talks.

And, BTW, shit, it seems like Eurythmy somewhat looks like my EBM dance style. Damn.

191:

Charlie, while I think your rant/analysis/whatever is quite on-target, I guess I'd make some qualifiers.

BTW, I have to get some more informations about the fundamentals of bitcoins to make some comments, e.g. if all bitcoins are created equal or if there is some way to differentiate old, "easily computed" bitcoins from the newer, "more tricky" ones, which might translate into different values. Another factor is the resilience concerning advances in new algorithms and hardware. People thinking bitcoins are going to bring down $BIG_GOVERMINT financially might remember some of us think the first to have a quantum computer is likely to be one of the TLAs...

For the carbon foot-print, it depends somewhat on the type of electricity generation used, and this is likely to reflect pricing somewhat. For a similar example, look at aluminium production,

http://dspace.mit.edu/bitstream/handle/1721.1/3603/mitjpspgc_rpt44.pdf?sequence=1

where the amount of hydroelectricity used quite factors into emissions:

http://www.carbontrust.com/media/38366/ctc790-international-carbon-flows_-aluminium.pdf

Historically, there has been a tendency to use cheap energy sources for processes like this, including exporting said processes to regions with cheap energy. For a breaakup of costs of electricity generation by type, see:

http://en.wikipedia.org/wiki/Cost_of_electricity_by_source

As we see, one of the cheapest kinds of electricity is natural gas, where the advent of fracking might play into the price of natural gas. If fracking is curtailed, that'd mean natural gas generated electricity becoming more expensive, making other ways of generating electricity competitive.

On another note, producing and exporting bitcoins needs little infrastructure, e.g. you need no power lines, or roads, rails and like to transport energy intensive goods, just an internet uplink. So maybe some of the unpractical renewable scenarios we're talking about, e.g. photovoltaics in the Sahara, might work, even without of, say, an aluminium industry. Yes, I know that one has a host of other problems, but it's just as a starting point. Or we could get India to finally build its thorium fuelled reactors. Come on, I'm approaching middle age, leave me some dreams, OK? Actually, later on other energy-intensive industries could follow suit BTW.

For the unsupervised markets, as I guess most of us here, I'm in favour of decriminalization and legalization of all drugs, though I'd prefer some supervision, e.g. sale only to people above a certain age. Also, there might be some problems with nefarious uses of potent pharmaceuticals, e.g. using said substances on unwilling participants, alcohol is still the date-rape drugs No.1, but I guess it's still more easy to get a few mgs of flunitrazepam into somebody than a few ten ml ethanol, and sedating your children with drugs is not that unheard of[1].

Looking at the screenshots from SilkRoad et al., some of the drugs seem to be diverted from prescriptions; you might argue which on is more toxic, feigning symptoms to get medications to trade, thus sowing distrust between physician and patient and likely deriving some sufferers from medications, or stealing medications from granny and thus leaving her in pain...

On the child pornography market, going after the news section, many of those seem to use a mixture of barter and gift economy, e.g. "You show me yours, I show you mine". And there is a quite sick idea of getting media to barter, though according to some of the discussions on the relation of the persecution of child pornography to the curtailing of child sexual abuse, little of the media coming up with said sharing is new, most is quite old, with some showing no minors at all and quite some exploiting some grey areas[2]:

http://en.wikipedia.org/wiki/Color_Climax_Corporation

AFAIR there were cases of child pornography produced for the internet, but this was, again IIRC, more a case of narcisissm than barter[3].

Still, we might argue that with the alternative of motivating further child sexual abuse to produce child pornography to share, it would be preferable to not outlaw all alternative ways of paying for it. Of course still persecuting it with full force.

For the assasination market, well, theoretically there is also the barter economy alternative, though I'm not aware of that one happening outside Books by Patricia Highsmith and adaptations.

http://en.wikipedia.org/wiki/Strangers_on_a_Train_(novel)

BTW I guess most of the guys involved don't know what they are playing with, it seems like they think it's a way to scare of politicians; now the politicians in question already are on quite some hitlists, and we didn't need bitcoins to motivate one Lee Harvey Oswald to shoot Kennedy. So politicians are already somewhat hardened targets, with bodyguards and tight security.

OTOH, there is nothing inherently dissuading people from going after the usual Right Libertarian poster guys. Plus they are much softer targets.

Then again, Right Libertarians and thinking things through is a complicated matter...

OK, just some musings.

[1] E.g. with clonidine like with Rebecca Riley,
where it likely lead to death:

http://en.wikipedia.org/wiki/Rebecca_Riley

Afaik clonidine has quite a therapeutic index, but 32 mg a day, with maximum dosage for adults 1,2 mg?

[2]As I always say to my pharmacist when speaking about why only retarded MPh not fit for injection or intranasal use is official for adults in Germany, or what might happen with loperamide interacting with my other mediations and crossing my BBB, or whatever, there are things I'm not proud of knowing about...

[3] The guy was caught because he was identifiable on
the photos, even though he used a Photoshop filter.
Speaking about Dunning-Kruger...

192:

Charlie, there's an odd emphasis here on the destructive power of having each Bitcoin acquire an increasingly high nominal dollar value. Deflation *can* be a problem when it's fast enough to screw over debtors and transfer their real income to creditors, but with Bitcoin any deflation comes from natural growth in the global value of real goods (or in the fraction of goods that people want to pay for with Bitcoin rather than with paper currency). It's hard to imagine that happening fast enough to really be a problem for debtors. It's also a self-correcting problem as long as there are competing currencies -- if you need to borrow money, but you worry that Bitcoin deflates too fast to be safe for you to borrow in, then don't borrow in Bitcoins -- borrow in dollars, and repay your loans in dollars, and then (if you wish) convert your dollars to bitcoins when you actually go and buy something.

The gardeviance piece you link to as evidence of a threat to stable governance reads almost as if gardeviance believes that the more a currency deflates, the more it tends to push out competing currencies and make them less relevant. However, this is simply untrue -- when people speak of a currency "increasing in value," they simply mean that one unit of the currency can be exchanged for a larger volume of goods than before -- they do not mean that the currency will be more useful, popular, high-traffic, or trusted than it was before. I cannot think of any reason why deflation (in and of itself) would actually tend to help an electronic currency supplant paper currencies.

193:

- Petrocurrency wars propping up fiat currencies have a carbon footprint from hell.

- Exporting inflation (and making brown people shoulder the brunt of fiat) is easier than taxing your population into responsible activities.

- Fiat violates its own utility because of Gresham's law - rapidly depreciating currency gets spent while real assets of value get hoarded and kept out of rotation

- No blacker market exists than the one that is powered by the "highy regulated" fiat currency of today (drugs, child porn, slavery, human experimentation, warfare, etc)

- Every single transaction regarding bitcoin is logged and is publicly available, unlike fiat currency today. (Perhaps one should stop thinking of taxation in terms of the peak nationalism of the 1950s and more in terms of social yields from frictionless markets)

194:

Maybe so, though whether that's necessarily a disadvantage is up for debate. But the fact remains that the main reason gold has any value is because a large group of people have made a collective decision to assign one to it based on... Well, I don't really know; force of habit probably.

195:

One aspect — both the original article and the bulk of the discussion are based on what might be called the official bitcoin narrative. However, it's not the truth — it's more of a cover story, really...

I'm pretty sure that in pretty much every important way, the official bitcoin story is false.

* The decreasing rate at which bitcoins are produced is not some intrinsic mathematical property of the algorithm, but a deliberate design choice. Worse, it's hard to come up with any reason for this design choice, other than the obvious one of allocating big chunks of wealth to early adopters, as #187 suggested. The standard story glosses over this to an astonishing degree.

* There is, in fact, a central bank, or rather half a dozen entities which between them control the majority (~85%) of the supposedly-distributed decision-making power. These "mining pools" can and do make decisions to manage the currency, for instance when a new release of the software inadvertently causes problems. Other parties, such as the authors of the standard client, are also pretty powerful and have also publicly used their power to manage the currency.

* The anonymity of bitcoin transactions is highly doubtful. So far I've only heard of motivated individuals tracking single exceptionally large transfers, but bulk statistical deanonymisation should be pretty successful if anyone can be bothered.

So, what's left?

A pyramid scheme designed to appeal to libertarians is the most likely explanation. As such schemes go it was clever and wildly successful, but hardly a civilisation-level threat.

196:

This is a good post about how badly bitcoin misses the point of what make up the majority of the world's problems with banking.

https://al3x.net/2013/12/18/bitcoin.html

My own takeaway is that bitcoin vs. postal banking is the big cyberfantasy vs. meatspace political fight we ought to be having right now.

197:


The 3 Billion POOREST people on the planet will be the ones who benefit most from Bitcoin. Alas, your ideology denies you from seeing this.

Libertarianism was designed to work with real messy humans and to correct the problems of idealism that have utterly failed us so far- for instance, the travesty that is "governance" in "democracies" like the USA. In fact, libertarianism, properly understood, is the one weapon against poverty that has actually worked with "messy" humans.

Unlike, for instance, Marxism, Libertarianism is based on science, specifically the science of economics... and this is why libertarianism has worked so well historically, to the extent that it has tried... very libertarian countries, like the USA have succeeded while countries that pursued marxism have failed.

In 20 years, when bitcoin is as successful as the internet has been, your essay will long be forgotten.

But your marxism will still be threatening to impoverish people.

Ironically, the first people who will be helped by bitcoin are not the drug peddlers and "evil" tax evaders that have your nickers in a bunch....

No, the people most helped by bitcoin will be the poor peasants in countries ruined by Marxism which inevitably results in currency controls. Venezuelans will be able to protect their income. Argentinians will be able to trade for dollars at a real exchange rate. Chinese will be able to preserve their money. Indians who have long been forced to use gold jewelry due to currency controls, and have paid a high cost for doing so, will be able to save even more of their money.

At some point, constantly seeing socialists rail against every technology that gives humans more freedom, you have to ask.

At what point do we admit that socialists are really just evil people who hate the poor?

Why do you hate the poor, Charlie?

Why do you want the poor to "die in a fire"?

198:

Libertarianism was designed

Heh.

199:

@160: In the long run I see crashing the property market as a feature not a bug. I proposed replacing income tax graually to prevent people being caught in negative equity. The large allowance for your personal residence I proposed should prevent most of the other problems you suggest. Own your own home pay no tax. Rent it and your landlord has to pay the full amount and pass the cost on to you.

200:

Engineer -

You are apparently not sufficiently educated on economics or how Bitcoin works - and doesn't - to understand the nature of the criticism.

Let us put the libertarianism / liberal/socialist control/taxation issue completely aside for the moment. We must of necessity turn to the degree to which Bitcoin fails utterly at the design and implementation level at being a viable currency within a functioning economic system.

Its limited nature and discovery mechanism, inflexibility, and deflationary structural tendency are *almost exactly* what's wrong with gold as a medium of exchange. It fulfills all the characteristics of a speculative commodity, not a currency. Its velocity tendency is regressive; the entire POINT of a currency is that the value of the economy is money supply times velocity. Deflation, due both to speculative behavior and the limiting nature, is absolutely the worst thing you can do for velocity. This aspect of Bitcoin's design - or anti-design - makes it a horrible awful viciously self-destructive thing to try and use as a currency.

It's so bad that it brings to mind the question of whether that was an intentional design feature of a malign designer, cloaked in extropian libertarianism, or merely an incomplete understanding of the use case and needed features (or, possibly, the best solution they could come up with at the time, intending that it be a 1.0-ish bridge to a 2.0-ish future with another solution).

Please don't go all slavishly libertarian on us. I'm libertarian, but I understand economy. I'm libertarian, but I understand the value of an organized society and rule of law in stabilizing and growing economies, societies, and individual liberty. Out-libertarianing me is kicking yourself in the balls.

201:

I'm a libertarian and I don't really see Bitcoin as an issue at all. It is just one more competing commodity in a huge marketplace. Bitcoin is no more likely to create a libertarian utopia (or enable the collapse of civilization into roving gangs of heavily-armed child pornographers/drug lords) than pork belly futures, Google stock, 1 ounce bars of platinum, or General Motors bonds.

Personally, I suspect Mr. Stross is having a bit of fun with the people he anticipates showing up for this post.


202:

Unlike, for instance, Marxism, Libertarianism is based on science, specifically the science of economics...

ROFL: "science of economics"... which one?

203:

sqferryman
COUNT - you can count?
How many dead?
Yes, each indicidual one may be a tragedy, but what proportion of the country or world population?
Now compare with previous times.
Sorry, but this is an old, tired & fundamentally WRONG argument.
Please don't do it again, huh?

204:

paws @ 151
An excellent idea!
Legalise & regulate & tax all drugs.
Distribution through your local pharmacies.
Drug dealers cut off at the knees, drug-related deaths & injuries plummett (Since most of siad events come from impure, unregulated uncontrolled substances that are NOT waht they claim to be) crime gors down, police can chase real violent criminals & tax e=returns go up.
What's not to like?

205:

Ian S @ 155
Here's hoping for a new bitcoin replacement, but one that is actually connected to the *creation* of value (OGH played with it as 'reputation')

I wonder, oh yes, of course, here it is:

Who steals my purse steals trash; 'tis something, nothing;
'Twas mine, 'tis his, and has been slave to thousands;
But he that filches from me my good name
Robs me of that which not enriches him,
And makes me poor indeed.
"Othello" Act III, Sc3.


206:

Regardning hoarding and money as a store of value:

Currently we save for pension or our next car by buying and saving/hoarding gold, stocks, bonds, property or shares in funds. Then we need to sell some of that to live as a pensioner or to buy a car, since we use money (SEK, USD, EUR, GBP) for that. But this split is artificial. There is no real reason why we can't buy a coffee at Starbucks with 0.005 of a GOOG stock, or with a credit card backed by my stash of gold. This is just a software and legal problem.

With Bitcoin, this artificial split is removed. I can save for pension with Bitcoin, AND buy an ice cream with it. Same same.

207:

Could you write in understandable English, please?

208:

"Engineer"
I strongly suggest you go back & read my post that was @ 100, but now appears to be #101, regarding "Libertarianism".
Pretty please?

209:

Legalise & regulate & tax all drugs....
What's not to like?

Well, what about all the prison wards facing unemployment?

210:

Err, down? Budget surplus *drains* wealth from the private sector, unless you have a trade surplus that covers both state surplus and private sector gains.

Where do I suggest otherwise? Not only do I understand the issue; I was the one who started from the position that the purpose of taxation was to fund expenditure rather than to make money for the government.

211:

Unlike, for instance, Marxism, Libertarianism is based on science, specifically the science of economics
So few words, so many FAILs it's hard to know where to start.

Possibly with the implied claim that Libertarianism isn't just another political theory? Maybe the statement that economics is a science rather than a branch of political theory? How about the obvious failure to understand that Marxism is not only a theory, but one which was not even supported by Marx himself as an organisational paradigm for an actual society?...

212:

Thanks Greg, an excellent summary of the advantages of a legalised and regulated narcotics trade.

#208 (presently) @Andreas - I presume you meant "prison warders"? On that assumption, wouldn't it be better to reduce the prison population (which this does) and allow us to train said warders in skills which they could then pass on to the remaining inmates, starting with skills in teaching basic literacy and numeracy since, while I can't be bothered searching for it, ISTR that something like 50% of robberies (street muggings, pickpocketings, burglaries, thefts of or from vehicles) are committed by persons who are functionally illiterate and/or innumerate?

213:

Charlie @87:
(And I wear black. JUST LIKE HITLER.)
---
Actually, Hitler seldom wore black, and never after 1939.

In the early days Hitler mostly wore suits in various colors, or very occasionally the Schutzstaffel black uniform for SS functions. After 1939 he exclusively wore the brown Party uniform, which he said he would wear for the duration of the war.

I, however, wear mostly black, which prevents my wife from exclaiming "you're not going to wear *that* shirt with *those* pants, are you?" and looking about in fear that the Color Police are going to break down the door and arrest me for unlawful color combinations, or something...

214:
So few words, so many FAILs it's hard to know where to start.

I must admit I feel tempted to appeal to fractal weirdness, too...

Funny thing is, most Marxists would say the same, since part of Marxism derives from an economical analysis. A heterodox one, but then, the economic schools Right Libertarians use are not that orthodox either. Of course, add in some philosophy, where both have a pedigree going down to Hegel, if we assume Right Libertarians mangled Stirner somewhat[1].

Add that Marx was somewhat into the "dieing off of the state" in his early writings, and there is some room for strange bedfellows.

BTW, may I remind some of our friends not that versed in political history that bolshevism is a part of, not including all of marxism, and marxism is a part of, not including all of what is called "the political Left", though there are some quite "rightist" writers quite indepted to Marx, so there is even some overlap with "the political Right".

Actually, historically quite a few of the guys calling for protectionism, wsome degree of workers' protection and a solid taxation base in Europe were not called Marxists, but something else. Namely Conservatives...

[1] Interesting guy BTW. Seems some of his fans got into a fracas with Hirschfeld about the idea of Homosexuality, negating his idea of a "third sex" and going for a somewhat "Ancient Greek" model.

215:

There is an extant photo of Hitler wearing leather.

If you are that way inclined.

But her never work a black kilt.

216:

Actually, I guess quite a few pharmacists wouldn't be that happy, though then, others might welcome the added profit.

I know of one case where a pharmacist in Italy denied a guy with a prescription for finasteride against male pattern baldness, to be paid by the guy himself, of course. Funny thing is, at least in this case there might have been a psychosocial indication, CBT is nice and all, and IMHO most people grow somewhat more accepting of their bodies in the long run, but putting the midlife crisis some years ahead is an important option...

217:

YOU FIEND!

I was nearly done with singing a certain song every few minutes. Now everybody:

"Springtime for Hitler and Germany..."

218:

#208 (presently) @Andreas - I presume you meant "prison warders"? On that assumption, wouldn't it be better to reduce the prison population (which this does) and allow us to train said warders in skills which they could then pass on to the remaining inmates, starting with skills in teaching basic literacy and numeracy

Yes, prison warders (non-native English here). My comment was tongue-in-cheek. I generally approve of drug legalization and see finding new jobs for prison personnel as a minor problem (AFAIK the majority of prison inmates are there for drug related crimes, so you'd have to close a lot of prisons if you legalize drugs).

I'm not convinced that former prison warders are best material for teachers, though...

219:

The problem with this rant is that you basically come off exactly like the crazy bitcoin fanatics that *do* want to take down the banking system, you're just equally far off in the other direction in thinking that 1.) it actually will take down banks, and 2.) that most people who use bitcoin want to take down banks. Neither are true.

"Bitcoin comes with an implicit political agenda attached"

Uh, no? Some of the *people* who like bitcoin have an agenda (yes, possibly including its creator). However, bitcoin itself is mostly just about fast, easy, verifiable money transference. It happens to also be sorta anonymous. You know, like cash. Of course, there's 185 times as much cash just in the United States as all the current bitcoins in the world, so it's really a drop in the bucket of anonymous transactions.

"BtC is inherently deflationary"

1.) So? 2.) Not infinitely... it's a commodity, like gold. Is gold deflationary? Sorta? But it's not $1 million an ounce. There's a point where people just won't pay more for it. Same is true for bitcoin. Also, unlike a fiat currency of a nation, there's no economy *depending* on bitcoin as their sole currency. It's not going to drag any country's economy into a standstill because it is increasing in price... just as gold's deflationary tendency isn't ruining the US economy.

"Mining uses a lot of electricity"

So do banks. Except there's specific economic pressure on miners to make their rigs as efficient as possible... and this only increases as bitcoins get more difficult to mine. Mining has gotten a few orders of magnitude as energy efficient today as it was in the beginning. Miners can't just charge fees and raise interest rates to make more money. The only reason it has been economically viable to mine is because bitcoin has skyrocketed.... and it's still right on the line of not being profitable for many people.

"Bitcoin mining software as malware"

What the... what? Lots of things are malware, why does that make bitcoin bad? Does malware "virus checkers" make antivirus software bad? This makes no sense.

"Stolen electricity will drive out honest mining"

Uh... it already takes specialized hardware, and the biggest miners are making whole rooms and buildings into miniing shops. You can't steal that much electricity. If some guy wants to put a mining rig in his office's server closet, that's not going to affect normal miners in any significant way.

"Bitcoin facilitates assassination and drugs and child pornography"

Seriously, we're back to this? Cash, 185x as much of it in the US. Is assassination really a pressing problem in this day and age? I get the child porn thing, but bitcoin isn't exactly going to make it explode in popularity.

"Bitcoin is pretty much designed for tax evasion"

Again... hello, cash. Yes, it's easier to sell stuff online for bitcoin. But there's still a million cash only businesses out there that seem to pay their taxes just fine.

You seem to assume people are naturally thieves, crooks, and druggies. I think most people are naturally honest and good. You seem to think we need some kind of father figure watching over us, steering us away from the bad things, whereas I think most people avoid bad things as a matter of course. Yes, some small portion of people will use bitcoin to do bad things. But that can be said of every technology.

220:

The poster-child for imprisonment of drug users is the USA, and it's hard to avoid thinking that the US prison system has no room for rehabilitation.

Somebody who leaves school functionally illiterate isn't a problem you need blame on a prison system. That primary failure mode needs fixing. But a prison system that cannot act to remedy the problem is a failure too.

Maybe the school should be liable for damages, if a convicted ex-pupil is illiterate.

221:

I needed to disambiguate that because a "prison ward" is a real thing in its own right, specifically a part of a prison where inmates requiring hospitalisation but not surgery are treated. It wasn't your English, but the fact that the specific mistake referred to a different actual concept to the main implication.

222:

Or, more specifically, Lederhosen, which are a part of Austrian national dress, and carry all the sexual implications of a bowl of soup!

223:

I was looking up how much gold there is in the world. Was there enough to bury a dragon?

I found an article which estimated that the total value of all the gold mined by man was slightly less than the annual NASA budget. It used a price of about $300 per troy ounce, and the figure is much higher now: about $1200.

It does go up and down a bit, and the rate of change is nothing like as high as for Bitcoin.

And, in current money, Apollo cost about $109 billion over 15 years, though that does include the tech development and infrastructure, some of it still in use. Capital rather than operating costs.

And the US DoD budget, a couple of years ago, was $680 billion

Can the US dollar depend on any "hard" asset, such as Gold? There just isn't enough of it. You could make a promise to pay gold for banknotes, but that's not all the money circulating. We're stuck with some sort of fractional reserve banking.

How many Bitcoins can there be? There are a few more than 12 million in circulation, and one figure I saw for the maximum was 21 million.

So just to pay the US Defense budget, a Bitcoin needs to be worth $32,000

Boys, I learned to use a slide rule in my distant youth, and you need to be able to do a rough calculation in your head to fix the decimal point. I know it sounds like a "kids today" thing, but there's so much craziness in the modern world that seems to depend on people not grasping what the numbers mean. To me, Bitcoin looks like another one of those headline political lunacies where the numbers just don't add up.

I can almost forgive some of the politics here, but you're not doing the arithmetic.

224:

Never let it be said that I let reality get in the way of mocking a Nazi.

225:

I didn't learn to use a slide rule, but one of my childhood friends was an old school mathematics teacher who taught proper mental arithmetic when she was teaching. The same "estimate and refine" principle applies, she and I could do "sums" at similar speed, and I'd agree these figures at a first order level.

Having said that, I'm going to return to inflation, and point out that most inflation in the World has occurred since the major industrial economies came off the "Gold Standard".

226:

But what about dogecoin? so crypto, very currency. such wow.

Seriously though, as a non-libertarian non-BTC-owner, I have to disagree with most of your points other than the deflationary aspect. It's a killer point and very important that more people understand it, but the rest is trolling. Magnificent trolling.

I think that you are confusing the stated political goals of some of the louder BTC advocates with the actual effects of BTC, and as a corollary and function of your (perfectly reasonable) disgust with those views/goals, are predicting the demise of BTC out of wishful thinking rather than particularly insightful analysis.

227:

Having said that, I'm going to return to inflation, and point out that most inflation in the World has occurred since the major industrial economies came off the "Gold Standard".

Which inflation, US$? Historical data shows more violent changes between inflation/deflation before 1950.

Also, what's wrong with moderate inflation (2-5%)?

228:

"For starters, BtC is inherently deflationary"
Yea that's a great thing about BtC, deflation is better than inflation. No more cheap shortcut for holding debt.

Lack of regulation can easily be fixed. The chain is public so government can always backtrack who made what purchase.
Naturally having to pay taxes and disabling the use for criminals will lower the value of a BtC, but it will also become more stable.

The carbon footprint of regular banks is much bigger, they have massive buildings, IT systems to process transactions, etc...

If the malware is not for BtC it's for something else, fact remains that users should keep an eye on their system and developers should make software more secure.

BtC gives the people freedom, where centralized banking gives control to big monolithic institutions that abuse it.

Just because I'm - apparently - a libertarian does not mean I'm wrong.

229:

Yea that's a great thing about BtC, deflation is better than inflation. No more cheap shortcut for holding debt.

Oh dear Cthulhu, not another one who thinks deflation is the opposite of inflation!

I despair. No, really. Deflation fucks up borrowers: but borrowers are not just dead-beats with maxed out credit cards. Most such borrowers are businesses trying to issue bonds or raise loans in order to underwrite expansion. Upshot: deflation fucks growth. It also screws anyone who owes anyone anything, and rewards people who happen to have cash for leaving said cash in a sock under the bed, rather than circulating it. Lack of circulating money is bad insofar as it leads to a spiral of increasing deflation and an economic slowdown as everyone becomes very reluctant to spend anything.

We haven't had debt-deflation in the developed world -- except in some highly specialized areas (the cost of microelectronics, for example, over the past 30 years) -- for the best part of a century. Otherwise we'd recognize just how toxic it is: arguably worse than hyperinflation.

BtC gives the people freedom

Doubleplusgood quackspeak, comrade! The Party approves!

230:
Yea that's a great thing about BtC, deflation is better than inflation.

Tell that to the spanish. Or the irish. Or most of the eurozone periphery countries who are currently undergoing a massive internal deflation, with the attendant results of massive unemployment (but the banks and everyone with savings get richer).

231:

That's what you'd expect, since money creation occurs through lending, and there's been a lot more lending and such since then. See for instance the various measures of the money stock.

If you go for a gold or other linked currency, you risk deflation and damaging the economy through lack of demand; if you go for an unlinked one, you risk bubbles through excess borrowing. Although I might be wrong, was the USA on gold in 1929?

232:
Although I might be wrong, was the USA on gold in 1929?
It was. US left the gold system in 1971.
233:
The coin limit is created because WE THE MINERS want that limit.

Good. Now, what is the decision mechanism that will lead to this?

Trying to switch the block validation algorithm so that, say, a fixed reward occurs forever requires the cooperation of a "significant" pool of miners. Otherwise, you get a block chain split, with one chain having halved reward and said valid by "old school miners", while the other chain has fixed reward, is considered valid by "new school miners". And both reject the other's validity.

At that point, you have forked Bitcoin. There's now two bitcoin chains, both separate, both independent. But unlike forks like Litecoin or Whatever coins, you're trying to start from an existing pool of money. Suddenly, everyone has an equivalent amount Oldbitcoins and Newbitcoins. Which they can spend completely independently. But otherwise, it's completely identical to, say, "we the miners" deciding to switch from Bitcoin to Litecoin.


(unless you think that there's enough peer pressure among competing miners to convince enough of them to switch and kill the use of Oldbitcoin currency. Good luck with that)

234:

1. Don’t blame drugs and child pornography (etc) on BTC
2. I don’t think anyone has as a goal to replace ”the current banking industry” with BTC - rather have it existing alongside it to easily and swiftly transfer ”worth” between two individuals

235:

Not at all. I'm all for arbitrage, and multiple currencies. But something that there is a limited supply of is quite a good thing to hold long term, as a store of wealth, not an investment.

Investments are fine for people who understand what they are investing in and understand the risk. Sometimes people just want to store wealth. It's a perfectly wholesome thing to do.

236:

Secular deflation is *caused* by growth. You might as well argue that because computers get cheaper every year for the same spec, nobody will buy computers and it will lead to a downward spiral in the computer industry.

There is no reason for deflation to "fuck up borrowers". Lenders just set the interest rates to compensate for deflation. Of course, this is a lot easier when rates are set by the market and not artificially controlled by central banks.

237:

ADMINISTRATIVE NOTE: The ban hammer is now being wielded, and comments un-published, by the Censorship Committee. Targets are explicit violations of the moderation policy, drive-by flamings, and pointless trollery. YHBW. HAND. HTH.

238:

Lack of circulating money is bad

Even though I'm not an economist (more of an engineer), it seems to me from what I've read economics that the point of money is to circulate. Our current economy just won't work when the money gets accumulated in some place.
It's even in the simplified picture found in most basic economy books: money circulates through the economy.
I know it's a simplified picture, but even then it seems to be often forgotten.

So, making a deflationary money, where, as you said, it's smarter to keep hold of all money you can get your hands on, because it'll be worth more tomorrow, will just kill the economy.

It also seems to me that this is one of the problems in the current economic situation: many big players are hoarding money instead of spending it.

239:

I don't think that's even possible. Wealth is based on an agreement between individuals and society. In capitalism it relies on the society enforcing debts and guaranteeing price stability. Since no one guarantees the price stability of Bitcoins, it might not be such a good medium to "store wealth". Just imagine that in a year some Virtual Cowry Currency becomes popular and a lot of people convert from Bitcoins to the new currency. What will your Bitcoins be worth then?

240:

Wait, what do people think of as deflation and inflation? THe last historian of economics by training I spoke to defined inflation simply as an increase in prices. Deflation is generally regarded as the opposite.

241:

"Violent changes between inflation and deflation", or economic instability caused by money supply constraints.

Reasons for this rather than permanent inflation are already discussed.

242:

Mark Zuckerberg alone still holds more money in his piggybank than the peak bitcoin market cap.

I'm not so sure that is true. Most of Z's "money" is in Facebook stock. Which means in many ways his wealth is tied up in just another form of BtC. I bet his actual cash on hand isn't more than a few million or so.

243:

Is that what happened to the person who claimed to be a miner, and yet apparently didn't understand that there's a limit to the number of units of anything that can be represented by an integer in an N-bit register?

244:

and point out that most inflation in the World has occurred since the major industrial economies came off the "Gold Standard".

And what would the world look like if we all had kept the gold standard. With it's limits on the supply of money. Would the world have more or less poverty than it does today?

245:

It would be different. People like, for examples, OGH, Ken McLeod, Harry Turtledove... derive some of their income from speculating as to exactly how it would be different.

I'm not advocating the Gold Standard; just observing the practical effects of coming off it.

246:

Secular deflation is *caused* by growth. You might as well argue that because computers get cheaper every year for the same spec, nobody will buy computers and it will lead to a downward spiral in the computer industry.

Increase in productivity is only a minor reason for deflation (and if deflation was limited to productivity raises it might be ok). But deflation caused by people hoarding money and banks not giving credit is a different matter, and is definitely detrimental to growth.

There is no reason for deflation to "fuck up borrowers". Lenders just set the interest rates to compensate for deflation.

Oh yes, lenders will give me €10,000 at -1% since we live in a deflationary period and I can't be expected to pay back the same €10,000 (or even more) in five years time. Get real.

247:

That was my point. From everything I understand having a currency that's fixed in it's supply will almost always keep the poor poor. If not poorer until we figure out how to keep the population from growing. Our current system has it's warts but as OGH has commented it works better than a fixed currency system.

And as OGH has noted elsewhere, many of these fantasies of the future require killing off 90% of the worlds population. Mostly those talks were about energy options but to bring the relative number of poor out of poverty with a fixed currency seems to require just getting rid of them. The poor that is.

248:

The Concise OED defines deflation as the reduction of prices in an economy.

Before I looked that up, I'd have said that it was a reduction in demand rather than prices. For example, individual pieces of consumer electronics are still getting cheaper year on year, but demand is running at such levels that the value of that market as a whole is still increasing.

249:

THIS!! That is all I have to say.

250:

Actually, since Bitcoins are not individually discrete, they're uncounted.

The Bitcoin Bank's software limit on number representation does not directly limit the number of bitcoins that can circulate; it limits the current balance that can reside in any bitcoin wallet. You can get more bitcoins, they just have to be in another wallet. The absolute number of "bitcoins" that can "exist" would be equal to that representation limit, times the number of possible accounts.

Which is greater than the number of particles in this Universe and a fairly chunk of adjacent ones.

251:

I replied by comment here :
http://www.antipope.org/charlie/blog-static/2013/12/why-i-want-bitcoin-to-die-in-a.html

Summery :

Almost all your concerns are addressable by nation states simply accepting that BitCoin like currency represents a reality check on their corrupt central banking, law enforcement, etc. policies though. There is however an enormous problem with BitCoin's Gini coefficient and the inequality large scale adoption would create.

We should therefore create a "lefty coin" that encodes progressive ideas about inflation, etc. into the currency structure. In this way, nation that eventually make their national currencies emulate bitcoin, except without the wasted electricity, etc., will have a progressive model to follow rather than a crazy libertarian one.

252:

THe last historian of economics by training I spoke to defined inflation simply as an increase in prices. Deflation is generally regarded as the opposite.

That's a gross over-simplification.

Inflation: prices rise, but they're able to do so because the money supply is also expanding. (This gives rise to the justification for using monetary policy to control inflation -- which doesn't work terribly well on its own.) Deflation: the money supply is shrinking (either because demand for whatever the currency is based on -- i.e. gold -- is rising, making money more expensive, or because money is being pulled out of circulation, e.g. in a misguided attempt to counteract inflation). So money becomes more valuable if you hold it. Nobody wants to buy anything, assets depreciate, interest payments on loans rise as a proportion of the value of whatever the loan is secured against, and so on.

It's probably worth distinguishing some types of commodity deflation (microprocessors get cheaper by 20-50%/year; maybe we discover new copper reserves so the price of copper crashes) which a working economy can survive from fiscal deflation (money supply shrinks) which is a recipe for stagnation and depression.

253:

Congrats Charlie. You've successfully trolled probably thousands of people, hundreds of which have commented on how you are wrong, or right, or whatever. I was a bit perturbed by your post, but then I read the first hundred or so comments. I went away, and I realised that you had to be trolling. It doesn't matter if you are right or wrong, does it. :)

Disclaimer: I like the idea of Bitcoin, or something like it. For many reasons, not least that it's an alternative payment system to the credit card + Paypal oligopoly. So even if it's not a currency, it can still be used to transfer wealth, far cheaper than the alternatives, and much harder to shut down.
I also have about 70 bitcoins (mostly from doing some web work back in 2011), worth about $35000 if you take one coin as $500. I've never spent any, or converted them to "real" money, but I have given perhaps 30 bitcoins to various causes (including the FSF, EFF (who then went and gave them to the Bitcoin Foundation, before accepting them again...), and the Freenet and Tor projects).

Political disclaimer: While I'm not a libertarian in the (apparently peculiarly American and Internet only) "if only we had a truly free market, it would all be wonderful" sense, I am a proponent of "small is beautiful", and so naturally oppose big governments and big corporations.

Regarding deflation there are Bitcoin-alts that actually implement an inflationary model. I've not bothered to study them closely, because of two things: 1. the only thing you can buy with them is other alt-coins and bitcoins. 2. Even if I mined or otherwise obtained a stack, they would loose all their value before the currency became widespread enough for me to spend them on something I actually want to buy. (Also, I personally think that slight deflation is far better than rampant inflation. Though slight inflation, perhaps tied to the number of people alive, might be even better.)

Bitcoin is not anonymous (at most, it's pseudonymous) and I don't know of any trustworthy laundry (or "mixer"). But I can't think of any way to make a truly anonymous cryptocurrency that doesn't track transactions (it's a very clever way of solving the double-spending issue that exists with any cryptocurrency). It's also not easy to hide them if you actually want to do something with them, because there is a growing chain of transactions that can be traced back. This fact has been used to prosecute Silk Road users in Australia among other countries.

I disagree with other aspects of you post as well. But I can't be bothered exploring them. I'll simply conclude with: I think that Bitcoin (or something like it) is much more of a positive for society than it's non-existence. It's far more of a danger to the financial "industry" (that actually produces nothing, and is far more damaging to society than any fringe currency can ever dream of, witness the "global financial crash" of 2008) than it is to government control, taxation, etc.

(Also, I got a 500 error when attempting to post. By my count, this post would have been post 252 or 253 if the post had succeeded.)

254:

Congrats Charlie. You've successfully trolled probably thousands of people

Er, rather more than that. Over 19,000 direct twitter followers; over 65,000 page views yesterday. Then you have to factor in RSS syndication, slashdot, Hacker News, and Reddit. I reckon I'm into six digits and rising rapidly :)

Note that I'm not against cryptocurrencies per se. I just think that Bitcoin is a terrible one, because it encodes certain political/economic assumptions about the world we live in which are ultimately toxic.

255:

That sort of depends; is it a successful troll if people are not moved to comment, or head off on discussions about economics rather than Bitcoin?

256:

If you own the blog, it's troll-baiting, if you don't, it's trolling.

IIRC the definition of trolling is "posting sharp comments with the sole purpose of causing extreme emotional reactions" or so. Which might be a bit wide since it also covers authors of exciting books and preaching.

257:

Well, Charles, I think you've missed some things about BitCoin.

The first is that the deflationary aspect of bitcoin is an "accidental" byproduct of Satoshi's design. Satoshi wanted to create a real version of decentralized Chaumian digital cash, and he knew that all sorts of speculators and libertarians would come running if there was the collective belief that the value of a coin would inherently appreciate. So this limited feature of Bitcoin was a way to accelerate the adoption of this first global digital cash.

And that alone is important: Prior to 2007, did the vast majority of people understand that it was possible to create a decentralized currency? And a currency where new "coins" could be minted without some centralized authority?

Note too that Satoshi didn't design BitCoin to peak at (say) 1 Billion coins (a different design would have allowed that). He chose a finite lifetime under the assumption that Bitcoin would just lead the way for other future digital currencies.

As new Chaumian currencies arise, they will not have to be deflationary by design. Indeed, they will support a variety of different modes for determining how much new money can be made. They'll support a wide variety of centralized and decentralized mechanisms for how much to "mint".

As for the "4 horsemen of the infocalypse", Bitcoin is actually neutral: It doesn't HAVE TO be anonymous, but it supports anonymity based on higher-level services, etc...Arguing against that is like arguing against free speech because of all the bad things terrorists, etc... will say with that freedom.

258:

Frankly, the reason I would like Bitcoin to die in a fire is much more simple that all that.

I kinda agree with Mr Stross but with the full knowledge that what Bitcoin is, really, is marginal. Irrelevant. It will not transform anything, be the standard for anything, transform the world, etc.

What it has become, on the other hand, is a microcosm of all the wrong things about money and investment today. What it has become is just a waste of time and money for people to gamble on without absolutely nothing of real value in it. But boy, can I get rich quick! Or not! Wait, I'm rich again! No wait not!

At a pathetically low level, yes, is not Goldman Sachs, but well. I dont know if the creator or creators of it had this in mind when they started it, if they wanted something different, to solve a need and/or to embody some belief about the role, function or future of money (and that is political, by itself) or what.

But what they got is a scaled down and simplified model of the idiocy of investment in all its bubble-making glory.


259:

"[Libertarianism] relies on simplifying assumptions about human behaviour which are unfortunately wrong"

Wow. It's as if the facts behind this indictment are blatantly obvious, otherwise at least one example would have been provided. In other words, Libertarians are naive because their assumptions are naive. Gotcha! We need the nanny state because... we need the nanny state! I cannot be trusted because... Libertarians are crazy! Let's keep forking over more hard earned cash to our beloved Big Brother and being such a damn nuisance!

Bitcoin has serious problems, but those problems are not the fault of libertarian ideology. Just as the problems created by central banks are not the fault of any single ideology. At least bitcoin is an attempt to address some of those problems.

260:

Heh, I didn't realise you had such a large Twitter following, and I underestimated the other forums.

You might not like Bitcoin, but can you see that (as someone on /. put it, and as g.emory alludes above), this is version 1.0. There are so many alternatives that could not have been possible without Bitcoin. So, Bitcoin may be awful, but it has enabled its successor already (perhaps one of the existing alt-coins with built-in inflation). And I'm looking forward to a crypto-future, where money is out of the hands of the big corporations.

261:

That's right, but it's amazing how many people think inflation occurs only when governments print money, never mind the banks creating it in a bubble. Also, in case anyone reading doesn't know, Monetarism doesn't work, it's been tried and failed.

Paws #255 - heading off on discussing economics relavant to currencies/ money is probably one desired outcome, certainly more than the usual strange attractors.

262:

I still can't decide if digital currencies are either a good or a terrible idea, but most of the points made in this article are based on misinformed facts. And that is putting it mildly.

For example, how exacly are Bitcoins "pretty much designed for tax evasion"? Bitcoins are, at their core, not much more than digital cash... where all transactions are authenticated via a P2P network. That means that BTC transactions are, sooner or later, public. We've seen news about big transactions pop up all over this year. All you need to do to tax efficently is to set up a transaction node and keep track of users and wallets to tax - hobbysts are doing this already. It is definitely a minor job for a government.

This is one of my pet peeves with BTC, in fact. There's *zero* privacy when it comes to transactions, which i'm pretty sure violates Habeas Datas and Bank Secrecy acts in pretty much each country out there. I have nothing to hide, but then again, i don't want everyone knowing about my financial status either.

263:

nate finch @ 219
Sorry, you (& a lot of both bitcoin & goldbugs) don't seem to get it, at all, do you?
ALL currencies are "FIAT" currencies.
What is Gold's inherent value - really?
It's very useful in old-fashioned photography (as well as Silver) and for some electrical contactors etc.
But it's only "money" because people AGREE THAT IT IS "Money".
The same is true of any $Money_Commodity so to speak.
Which destroys the argument, somewhat - doesn't it?

264:

How *will* money be out of the hands of big corporations though? What would be the mechanism, when all the wealth is in their hands? The advantage of currency controlled by the government is that ultimately, it's one person, one vote, despite corrupting influences like lobby groups, etc. Currency systems like bitcoins, by devolving directly to one $, one vote, will not afford the majority the power to make changes.

265:

To be fair, the proposed top marginal tax rate in France of 75% is right around the revenue-maximizing rate (in the United States) of 73% (more here), so it's possible that such a rate would be high enough to be slightly self-defeating.

266:

also # 228-230
The other poster-child for deflation is err ... 1929-36 (approx)
Purchasing power of money went up & peoples wages, even if they were in work, were cut.
So nice.

267:

# 236
Exactly backwards.
Prices of goods dropping is not deflation - certainly not if it is a result of increaded production/manufacturing/distribution efficiency.

268:

One annoying artifact of history teaching is that so much coverage is given to the bout of hyperflation in Weimar Germany in the 1920s. Certainly the classic 'wheelbarrows of money' picture is impactful. But hyperinflation was a brief episode, it was survived by Weimar, and indeed, Weimar Germany prospered economically *because* of it, wiping out 900% government debt.

Comparatively little attention is paid, however, to the deflation of the great depression in the early 30's...

269:

@ 259
OK - I ran inot a USAian Libertartian a week or so back ... he suggested that all guvmint controls were evil.
He was trying to argue against food (& drink & presumably drug) purity standards & enforcement.
This is the level of lunacy that *some* US-Libertarians descend to.
OTOH, there is far too much guvmint interference & enforcement in areas that are none of its business, such as shown up by the Snowden revelations.
But, being against the antics of the NSA & friends does not mean that you want no food safety controls ...
Can you see the difference?

270:

Interesting idea from John Michael Greer's often annoying The Wealth of Nature (tl;dr: he's a peak oil guy who seems to be getting more doctrinaire as his beard gets longer, but he does have some good ideas).

Riffing on EF Schumacher's Small is Beautiful, Greer proposes not one but three economies, each with different rules. I'm pitching them out here as a way to help talk about the problems with Bitcoin.

The Primary Economy is Earth and the biosphere: it provides us with such things as energy captured from sunlight (food), water, air to breathe, gravity, radiation shielding, decomposition of our wastes, and goods and services for the Secondary Economy, which I'll get to in a minute. Primarily these are renewable resources, and are roughly the equivalent of income in conventional economics. Humans are utterly dependent on the Primary Economy. We can degrade it or improve parts of it through skilled work (soil building to make farmlands and the like). To the extent that it can be monetized, it's at least three times larger than the Secondary Economy, in terms of goods and services provided to humans.

Then there's the Secondary Economy, which is what most economists regard as the only economy: the economy of real goods. This system is secondary because it depends entirely on the Primary Economy above, plus non-renewable resources we dig up (such as the fossilized sunlight of fossil fuels). If the Primary Economy is the equivalent of income, the Secondary Economy is the equivalent of capital in a capitalist system. If you want a healthy business, you want to run on income, not on drawing down your capital by burning through non-renewable resources.

Finally there's Greer's Tertiary Economy, the financial market. At its base is debt, the promise to pay for something at a future time, possibly with interest, possibly without. Now there's nothing inherently wrong with a Tertiary Economy, because such promises are the basis for any society: help me now, I'll help you later. Money is simply where we quantify such promises, so that we can compare them. How many promised bushels of wheat is a promised cow worth, and can I make a trade? The problem is that money isn't a real good, it's an unreal idea, and there's no physical limit on how much money can be created. The only limit is demand, how much other people are willing to accept from the creator. If I can get you to accept my trillion dollar bond, I'm a trillion dollars richer, until I have to pay you back.

When people start making money by moving money around, you can get things like financial bubbles,at the end of which a bunch of money--unfulfillable promises, basically--disappear, impoverishing anyone who traded real goods for these broken promises.

The problems begin when you insist that there is one economy, not three (or more), measure them all by one yardstick, and assume they all operate by the same rules. The last is particularly important. Primary goods like energy can't be created from nothing. They can be concentrated, dispersed, improved or degraded, but they can't be externalized into nothing, nor can they be conjured up in a financier's ledger. Unfortunately, when you conflate all three economies, you get problems. For example, right now there's so much money that, if it was all used to buy real goods, it would cripple the Secondary Economy and seriously degrade the Primary Economy. Indeed, most money has to be squirreled away in virtual financial instruments just to keep it from wrecking everything in a wave of hyperinflation. Eventually all of that money will disappear. It's not real, after all, it's just promises to pay later, and the human species has survived with only primary and secondary economies for tens of thousands of years. In the meantime, we're struggling with how to deal with it, trying to save the useful parts of money while controlling the (literally ballooning) problems.

Getting back to the issue of Bitcoin, I'd suggest that thinking of it as a phenomenon of the Tertiary financial economy makes its problems easier to talk about: it's more subject to speculation than anything backed by real goods or national threats of force. As Charlie originally noted, it's a promise to pay that's weighted with a lot of philosophical baggage that many of us find at least partially objectionable.

271:

A couple of things...

1) Anyone claiming that BtC is anonymous is a fool, a liar, or both. All transactions are public for all time... and connecting a datasets like that to real names is the current favorite sport of a large section of the computer science research community. Anyone who thinks the large number of possible wallets protects them from identification is kidding themselves. I expect the first prosecutions for BtC-assisted tax invasion to come within the next couple of years, and I expect them to be prosecuted on the basis of the blockchain and bank records.

2) It is theoretically possible to launder BtC through other crypto-currencies. However, I don't think it's practicable at a scale large enough to represent a threat, for two reasons. First, none of the alternates are large enough, nor do they show any sign of growing large enough. Second, they are all based on the BtC protocol, public blockchain and all. See my first point.

3) BtC is a remarkably shitty medium of exchange and will remain so into the foreseeable future. Why on earth would any remotely sensible person take or make a loan in a currency whose value might change by 50% in 24 hours? How about a salary, or any other medium to long term obligation? Given such volatility, there's no way for a monetary economy in legal goods to develop around it, which means that speculation will continue to rule the market, which means it will remain extraordinarily volatile.

4) As noted elsewhere, all money is collective consensual hallucination. It's money because we agree it is, and further agree to denominate our material obligations in it. All gold and silver are to money is a Neolithic anti-counterfeiting hack. Goldbugs fail because they miss the first bit and mistake the anti-counterfeiting hack for holy writ.

272:

Thank you.
"The Laffer Curve" is wrong in detail, but Laffer had a point.
A top tax rate of 75% will drive people away, or simply initiate (even more inventive) cheating.
The trick with taxes is to make them:
a] Progressive
b] Fair
c] Not so high that people are induced to cheat or flee.
d] SIMPLE

Re point [c] & Laffer, I would suggest that a top (integrated) tax rate of 60% is as high as one should go. Some people would say 50%, but that's all right too - we can argue about the details.
as for [b]&[a] it should be obvious why these are necessary requirements, with the added proviso, that the poorest should not be paying any taxes at all.
As for [d] - if you have your first three ducks in a row, then this makes paying taxes easy, reduces the amount of time wasted by accountants [ NOTE ] and, since there will always be antisocial types who try to cheat or game the system - makes it easier to catch those who do try to benefit at others' expense.

[NOTE: My wife is a Tax Accontant - & she, & all her assocoaites would LOVE a simpler tax system - even according to them, the syatem at present is very close to broken { IS broken in the USA } - and less work. There still would be work for them, but it is presently completely bonkers.

273:

I half-believe two different conspiracy theories about BitCoin:

1) It is a deliberate parody of gold.

2) It was created by the NSA as a way to comprehensively test the security of SHA-256 and future hash algorithms.

274:

I disagree. It is subject to speculation, yes, but not for philosophical reasons. Right now the market for Bitcoins is *very* small and prices fluctuate widly because of it - a mid sized transaction can easily impact the market. Add to that the fact BTC sees little use as currency: most users speculate with future price rises (see the Winklevoss twins for an example) and just store Bitcoins away.

In the end, technically here's little separating Bitcoins from other flat currencies. Its widespread adoption or failure will depend on factors other the fact that it is digital in nature. And it is certainly not a "weapon" or a "way to avoid taxes". Take it as an experiment if you like; i'm certainly very interested to see how it usage pans out in time.

275:

They are covered in astroturf...

276:

So I get that you're exaggerating for effect, but I think you shot pretty far wide of the mark.

1. You assert that Bitcoin is worse than our current system. The current system is responsible for rendering entire towns and cities bankrupt, causing hundreds of thousands of people to lose their homes, and on and on. And that's just in the last decade. The sins of Btc you list are a pittance against that.

2. Bitcoins being deflationary is bad for people who hold bitcoins exclusively. It's approximately the same error as holding exactly one stock in your portfolio. My sympathy for people who do either is pretty limited.

3. Bitcoins' ability to be "hidden" is still unproven. We already have one example of someone using relatively simple techniques to track bitcoins and I imagine more will be invented. This is measured against the ability of banks to launder billions, hide money from drug kingpins and evade embargoes on arms sales. And that's just the last two years I'm talking about. I see no scenario under which Bitcoin malfeasance could possibly approach the scale of fraud associated with, say, LIBOR.

4. I'll ignore the carbon footprint thing as others have responded to it, except to say you could make the same argument about online poker, World of Warcraft, or Facebook. All have questionable social value, definite downsides, and all eat way more electricity than Bitcoin mining.

5. Bitcoin mining software is now being distributed as malware. Wait let me fix that for you... "Software is now being distributed as malware." Also PDFs, Excel workbooks, and on and on.

6. "Bitcoin's utter lack of regulation permits really hideous markets to emerge, in commodities like assassination (and drugs and child pornography)." Let me fix that one, too: "Bitcoin's utter lack of regulation eases really hideous markets that already exist, just like Craigslist, BBSes, and the back pages of printed magazines."

I could go on and on, but the point is that you're heaping sins on Bitcoin that are not unique or even particularly bad with Btc. But you appear to be blaming the car for the fact that its driver used it get away from a bank robbery.

277:

Well, but all that sounds precisely as a good set of reasons NOT to use it as currency. What kind of circunstances do you imagine would make it be adopted as one?

278:

If Bitcoin is intended to be a Chaumian currency, then it fails at a cryptographic level - as it's not a zero-knowledge crendential-based system. It transmits far too much information to be an effective digital cash.

279:

Deflation fucks up borrowers

Agreed, for any proper legal tender.

But is there any chance that anybody would ever create any sort of debt instrument denominated in Bitcoin? The idea of lending or borrowing in Bitcoin seems insane even by internet-troll standards, given its architecture of semi-anonymity and irrevocability, and its observed volatility. And if debt is never, ever denominated in Bitcoin, how harmful would deflation be? (This is not an argument for Bitcoin disguised as a question; I actually don't know the answer to this.)

280:

That'a great question. To be honest there's no forseable scenario in the near future where Bitcoins stabilize in price. Notice that i said "near": a critical mass of mined BTCs and associated transactions will be necessary before it actually starts working as a stable currency. We're not quite there yet, and we could possibly never be.

But again, this has nothing to do with the technical merits of Bitcoins themselves. It is something completely new and revolutionary which might very well work or fail spectacularly. Remember, BTCs are only 4 years old...

281:

You say "Our current global system is pretty crap".
It *IS* crap in many ways:
Because gov't can print money at will:
1. It punishes savers (typically older people)
2. Gov't keeps spending money from next gen it doesn't have.
3. G'ovt keeps spending money on wars when it can't govern it's own house.
4. G'ovt spends money on surveillance of people who find the whole system objectionable. Certainly not the constitutional democracy we inherited.
5. G'ovt ignores (if fact steals) hard currency (Gold) that is demanded legal tender in constitution. Aren't bit's easier to hide?

The only solution it to decentralize. Centralization whether it was communist Russia or our newly found Orwellian state will fail because it is too top heavy.

Bitcoin isn't ideal, but at least there is a chance a meritocracy could emerge. Right now we are guaranteed failure.

282:

Ah, I think I missed a word or two in that post. What it prevents corporations from controlling money. At present, three corporations can cut off most international money transfer for things like buying over the Internet.

And I disagree that it moves the system towards one dollar one vote. That's the system that's already existing in at least (from an outsider's perspective) in the USA (and to greater and lesser extents in other "representative democracies" (a great lie of the modern age, they are generally neither)).

283:

I came across this on Twitter, and OGH may have also seen it by now:

A report on the Jupiter Bitcoin mining hardware

Report date: 6th December, before the crash.

Price, when available: $5000

Bitcoin production rate: 3 days per Bitcoin

Power cost: $4 per day

So, it will take about 30 days, at current prices, to produce enough Bitcoin to pay for the hardware, and about $120 of electricity.

The company which makes them said it cost $3.5 million, so they must have sold 700, minimum, or they wouldn't be still in the business. That's about 230 BtC per day, there were reported to be 5400 mined yesterday, and the manufacturer claims their customers are producing 70% of Bitcoins.

So the old generation might have got them over $20 million of income.

There's something that feels off about the figures from the article, but selling the Mining hardware looks rather good business, like selling hard-wearing pants to gold miners.

Oh, and there was a pic in the article, showing the screen of the computer acting as a monitor. The box was producing 677 gigahashes per second.

It certainly makes the energy/bitcoin figures Charlie used look badly out of date. But the Mining business has a big hardware cost.

284:

I confess I'm just slightly disappointed that there's no Nu-Money, Crypto-currency called either 'Flaxscrip' or 'Hempscrip', mentioned in http://coinmarketcap.com/ or a currency that is deliberately designed to lose value the longer you hold onto it((fnord)). Why mine a crypto-metal when you could grow a virtual herb?

Brothers Wilson, Shea, Malaclypse and others had a lot to say about the magic involved in the official monetary systems. Most of them seem to have a magic wand somewhere in the process that blesses the object, transactions or whatever and turns them from base metal or numbers into "Money". It would appear that Bitcoin's magic wand is a bit flaky. Still, like Old Lodge Skins said in Little Big Man; "sometimes the magic works, sometimes it doesn't".

285:

I'm a happy man today because I've waited a long time for someone to say what you did about Bitcoin. That little 50% drop in its value is also some cause for optimism if not celebration. ;)

Since I build computers, it would have been easy to get into the so-called mining right at the beginning but the disinclination to do anything that disgusts me predicated against it.

Thank you for being a voice of sanity.

286:

I *tried* to make some sense of the argument, but all I could think of was "he's playing the think of the children card!" and couldn't even read the other reasons. This is either your worst blog post, or your best troll :)

287:

Either I've missed something or you have. I'll cheerfully agree (3), but (5) does not apply because not everyone is USian.

288:

OK, this may be a naive question, but why are they selling this hardware? Once they've bought the materials and built the kit, surely it makes more sense to keep it and mine BtC themselves?

289:

Exactly. And even gold's supply isn't really limited: We dig more out of the ground every year. Goldbugs like it, however, because it just isn't worth significantly upping the rate at which gold is mined, so it LOOKS like a finite resource. Indeed, the problem with gold is that it doesn't really scale with the rate of global wealth creation.

If they wanted to use some sort of atom for a currency, the obvious choice would be silicon, which is a nice proxy of the amount of computer chips and optical fiber being created each year. But of course, goldbugs wouldn't bother with that because the amount of silicon they could buy would never impact demand and/or price.

290:

You might think that.

I see two possibilities:

a) It's an esoteric but very effective way of shorting BitCoin,

b) They're ploughing the profits from the mining farms they sell into building extras and running them for themselves, without telling anyone (sell miners at a 10-20% profit, use profits to buy miners).

291:

Hey, don't worry. Bitcoin is GOING to die in the fire... You see, Bitcoin believers also continue to insist on two other "features" as being good.

1) That, by default, bitcoin is irreversible.

2) That, by design, bitcoin is unlinked to an existing currency.

The result of these two decisions means the Bitcoin community doesn't understand that "Bitcoin is cheaper for financial transactions" is a lie and never will be true:

Because its volatile, sellers use a service like Bitpay (costing 1%) [1] which turns the bitcoins back to dollars, because you don't want to be holding that radioactive hot potato. Even 2-3% daily volatility, let alone 20-30%, is enough that this will occur.

Because sellers are converting BTC to dollars, buyers must go the other way for the system to balance!

Yet because Bitcoin is irreversible, buying Bitcoins is necessarily hard: you can't just log into your bank account and buy Bitcoins, and you never will, because if you could hackers would corrupt your computer, steal your login, and take your money, turn it into Bitcoin, and run [2].

Thus best path to buy bitcoins involves cash, which means the buyer's cost is 2-3%.

So 1% + 2-3%, and a Bitcoin transaction costs MORE than a credit card transaction! Plus a heck of a lot more hastle.


Then again, Bitcoin is small: Even at current value, the amount "mined" is valued at less than $2M/day. Peak new beanie baby sales were over $3M/day...


[1] Yes, its easy for sellers to do this (and charge the Crypto-libertarians an extra 20% for the privilege), but its important to know that such sellers are not really taking Bitcoins, but charging in dollars, taking Bitcoins and immediately turning them into dollars.


[2] If an attacker is on your computer they can access your wallet, take the Bitcoin, and run. "Please don't store Bitcoins on an internet connected device, regardless of it is your own or a service's."

Yes, you should NOT store your Bitcoins on an internet connected computer. THIS is the currency of the Internet?

292:

There is a cryptocurrency that loses value the longer you hold it. It's called Freicoin, after Silvio Gesell's idea of Freigeld (which also loses value the longer you hold it).

It's a reasonably good idea (anything used to purchase things that rot and corrode should also rot and corrode lest people just hoard the money instead), but in a world with zero transaction cost, the hoarders will just move their money over to the highest valued deflationary unit they can find instead.

293:

Personally speaking, it would'be been nice to have got into this bubble when it started. Bubbles aren't bad (For you) if you get in on the upswing. I keep missing all the bubbles. And as for value, it's not like we've seen a multitude of unlikely things become valuable in the last 20 years (People's collected public journals will be worth billions? No sci fi author predicted that one)

As for the deflation thing, it seems like the only way to encourage people to be early adopters. A fiat virtual currency backed by nothing that also inflates is gonna be a hard sell...

I've also read a few articles on other, non libertarian aspects. For example someone made the point Muslims might latch onto it because the low transaction fees satisfy Koranic edicts. I also skimmed a Marxist interpretation of bitcoins recently, it seemed positive.

294:

Don't forget option #3:

When in a gold rush, don't dig for gold, sell shovels and blue jeans...

Actual mining is a red-queens-race with so many people that really, the profit ends up accruing reliably to those selling the mining rigs.

295:

I see the weak anonymity of Bitcoin as a feature, not a bug. I don't use Bitcoin, but there are times when I would appreciate some sort of on-line payment system with weak anonymity. By "weak anonymity" I mean that, while law enforcement can breach the anonymity with some effort if necessary, it is robust against sales and marketing attacks and casual, lazy surveillance.

Currently, if I pay for something with PayPal, the recipient gets my real name and a real, permanent email address, which potentially subjects me to spam. If I pay with a credit card, the recipient gets my real name and a real physical billing address, which might subject me to junk mail or persistent unwanted monthly "subscription" charges hidden in fine the print somewhere. Either one has the possibility of leaking data over into social media without my explicit permission and/or logging my purchase with various data brokers for later ad targeting and price discrimination.

These sorts of risks discourage me from, e.g., purchasing music or other content on-line directly from authors and musicians, or from small start-up outfits that don't have well established reputations for less aggressive marketing.

In countries with proper data protection laws, these dangers might be mitigated, and are thus possibly less relevant to some of the readers here. Being in the US, I have no such protections. And in any event the law don't protect you when your vendor gets hacked, however.

TL;DR: I'd be more willing to pay $8 US in some anonymous electronic currency to, say, Charlie Stross LLC, for a direct download, than I would be to give him my credit card information.

296:

Is it possible to tell whether BitCoin trades are being conducted by machines or humans? Which brings me to: Do any of the trading algorithms ever trade in BitCoin? I tend to suspect machines whenever anything on the exchanges starts yo-yo'ing for no reason ... unless the yo-yo-ing is specifically intended to get more people trading so that the exchange can take its cut.

I don't see the appeal of BitCoin although it seems to make sense that a purely electronic currency might eventually become the standard/universal. And, because this currency seems to be based entirely on intellectual output, i.e., less subject to limits than some mineral/finite resource, it should grow stronger as most modern economies produce intellectual rather than materials goods/services. (Why did the creator of this currency put a ceiling on it? To see what other currency/exchange principles might spin-off, or what?) However, the transaction/exchanges described by posters suggest that its market is very limited, specifically, too homogenous.

In any case, it's a good real-world exercise in seeing what crawls out when you bait your trap with 'a-get-rich-fast-and-hide-your-sins-from-neighbors/wealth-from-taxes' promise. Evidence in favor of government-backed currency.

297:

Not really. Being digital in nature you can't really tell wheter a transaction was made by a human or a computer process.

A little known fact about Bitcoins (Charlie, i'm looking your way :) is that transactions are scripted programs which *can* be modified. Right now all transactions are simply of the "X pays Y 20 bitcoins", but this practically unknown feature opens a doorway to complex financial instruments based on digital currency. Smart contracts, auctions, you name it.

As i said before i have no idea if Bitcoins will ever take off. But the concept alone is fascinating.

298:

I can't see any reason why you shouldn't run a more or less conventional on-line auction in Bitcoin rather than, say, Vietnamese Dong.

299:

David Cameron's "protect the children" internet censorship might be awkward for transactions based on the Vietnamese Dong.

Which is a distraction.

And a cheap joke.

But you're right. All the workings of an auction, or any of these complex financial instruments, are based on some token that the parties agree on. How many pork belly futures do you think are actually delivered? But people do agree what they are, well enough that when the delivery point comes, something can happen. You could do that with Bitcoin, but would a market work? It's not just what your token is.

300:

I picked a random (but real) currency deliberately to make the point that an auction is a simple POS transaction, very much like buying something in a shop.

A Futures market (and these are or were real commodities markets) is only complicated by the fact that the physical goods do not exist when we make the initial trade. If you're paying me, say £10 per kg for lamb to be delivered next September, that's a Futures trade. You're acting in the hope that lamb will be scarce, and you'll be able to immediately sell your Future to an abatoir or wholesale butchery for, say £12/kg. I'm acting in the hope that it will be sufficiently plentiful that I can make up any shortfall between what I breed and fatten and what I've sold you at, say £8/kg.
If you're right, your advantage is that you stand to make 20% on capital employed, and if I'm right, mine is that I get cashflow to breed and fatten stock on now, and to make a profit on any shortfall.

301:

You mean the internet filter that blocks sex advice websites? That's definitely worth a rant, although obviously this is Charlie's ranting space.

302:

Bitcoin has all the fun of the gold standard only with the effects cranked up to warp 11. The overall deflationary trend in particular sucks as deflation kicks ordinary people in the teeth. Just ask William Jennings Bryan. The

(Note to goldbugs: "it's shiny" isn't a less arbitrary source of value than "because the government with the big army says so". Also, leaving bankers in charge of the money supply in practice has worked much better than leaving it in the hands of miners and happenstance)

As for money laundering, Bitcoin is like cash except with an important difference: Bitcoins do not take up physical space. It's much, much easier to launder US$10 million when you can keep it in a thumb drive instead of a storage locker. This isn't a hypothetical either, shady folks really do have the problem of securing large stacks of cash.

303:

It's much, much easier to launder US$10 million when you can keep it in a thumb drive instead of a storage locker.

If you doubt this, get a stack of 20 notes of an arbitrary but common denomination (or mixed denominations will work if all notes are the same size in your local currency), fold them in half, and measure he stack thickness. Now consider that 1E6 currency units of them will likely be about 1E5 times that depth if in a single stack.

304:

I slipped a decimal in my last; it should be 1E7 currency units.

305:

I have a minor difference about Leninism. I agree with you, not that that is of interest ;) but would go farther. I don't think it is even internally consistent. It may be consistent from a logical point of view, but not from a systems point of view. (But maybe 'possible' should be used for the systems case rather than 'consistent'.)

An essential feature of every stable system is the presence of both positive and negative feedback loops. This feature is lacking in all forms of communism, though in 'village cooperative' types the feedback is actually there in the village social milieu.

The classic communist idea is "from each according to his abilities, to each according to his needs". This is a simple expression of two disconnected, uncontrolled systems. Some workers will end up working themselves to death, and those who are good at 'needing' will acquire an infinite amount of goods.

In practice this can be seen in the wealth of leaders of nations that practice any form of socialism, from Brezhnev who is said to have owned a large fleet of Ferraris, to Hollande of France today, who turns out to have acquired a mysteriously large amount of wealth.

In practice, the feedback that must be there goes through the political system instead of the economy - bribery of and extortion by public officials, nepotism, political prisons, etc. (Also black markets relieve some of the force.) This is already too long so I won't blather on any more, hoping that the essential ideas are visible.

306:

What you're describing is speculation on the futures market, which of course happens. The original point of futures though was to hedge risk, and in ideal circumstances both parties benefit. For example, when a wheat farmer sells a future he gets immediate cash that she can use to run the farm and grow her wheat, while the flour manufacturer that buys it has a guaranteed price for raw materials it can plan around.

As an aside, commodity futures are a type of derivative, so the instruments have their place. Of course, so does regulation; if the fancy mortgage CDOs were standardized and regulated the way futures are life would have been much easier when the real estate bubble popped.

307:

Have you read the original paper ? There is no hidden agenda behind this as speculated by you and the media. The mainstream narrative has focused on use cases of bit coin which is not related to the original intent of bit coin as a currency or protocol. This is the only technology which has come close to disrupting the financial industry . Bitcoin is not intended to replace Fiat , it is intended to replace financial intermediaries who charge way too much with very minimal value add. Try making an international money transfer . In spite of all technological advances MSB's charge way too much !

308:

Did you miss the point about the instability of Bitcoin - Fiat currency exchange rates? Would you actually accept an offer to pay you in an exchange medium that could be worth half of what it was when it left me, when you received it?

309:

I see Bitcoin (no capital "c") as a technical solution to a legacy payment system not designed for the Internet. Many people with a political agenda attach themselves to it and try to claim people that use it agree with their political views. Those who looks at Bitcoin as a political tool or only as an investment vehicle tend to misunderstand and misinterpret Bitcoin.

310:

I did some figuring on this sort of thing when I was researching for Nanowrimo this year. There was a news story that claimed 20 billion Euro in cash had been flown into Moscow from Iraq, and was sitting in an airport warehouse.

There are enough 500 Euro notes that have been printed, and the volume and weight are low enough to fit on a plane. But it's still not very plausible. Can you use that much money without being tracked down?

The chances are that the notes have not been rebundled between the printer and the airport, so they have consecutive numbers, which would be known, and are worth enough to have the numbers checked by a bank.

Cash is not always anonymous.

And this is on a whole different scale to the classic American numbers racket and florist's shop. It's about three times the turnover of the Las Vegas strip, according to one set of figure I just found, and Las Vegas was allegedl;y set up my the American Mafia.

And while the LSE has the volume, it is no help getting the money from physical cash to the electronic form they use.

Scale matters. Whatever you want to do.

311:

As per my #308 (timed some 18 minutes before your message), Bitcoin is not a viable exchange mechanism whilst its value against other currencies is so volatile.

312:

Note for USians; the Euro-USD exchange rate is about 2 to one, so ask yourself how many times you could spend a $1_000 bill without getting looked at funny, or possibly a cop on your @$$.

313:

(breaking SHA256)

I tried years ago when bitcoin was worth cents per unit. It's not that easy.

314:

paws4thot @ 303:
If you doubt this, get a stack of 20 notes of an arbitrary but common denomination (or mixed denominations will work if all notes are the same size in your local currency), fold them in half, and measure he stack thickness.

My post was supposed to include a link to a picture of US$200 million of seized cash, or at least a good chunk of it. D'oh!

315:
The coin limit is created because WE THE MINERS want that limit.

Good. Now, what is the decision mechanism that will lead to this?

The mining pools.

Anything that's agreed on by (a) the authors of the standard client, and (b) BTC Guild and GHash.IO, will become the future of the currency.

Even if there's some lingering disagreement, there will be no double-spending, because both sides will continue to process all ordinary transactions. Only the "mining" transactions will be in dispute (or payments to/from particular wallets, or whatever). There's incentive for the miners to pick the winning side, because mining on the losing side is a waste of money, so I'd expect a clear winner to emerge pretty quickly.

Whoever controls more than 50% of the mining wins. BTC Guild and GHash.IO between them account for 55-60% of mining.

https://blockchain.info/pools doesn't look all that different to a national parliament in a country with proportional representation.

316:

Oops, I meant to say I replied by comment here :
http://www.metafilter.com/134528/Sell-Mortimer-Sell#5338722

Again, any nation could kill BTC by creating a state subsidized transaction network with a touch of pseudo-anonymity and other desirable features, thus resolving the the environmental concerns.

317:

Nobody would have been willing to seriously accept a fiat currency that's inflatable by the creator; the reason you trust government fiat currencies is that most governments usually don't think the temporary economic benefits of hyperinflation are worth the long-term damage, with obvious exceptions over the last few decades like Russia, Mexico, Argentina, Israel, Zimbabwe, Nicaragua, Venezuela, etc. An inflatable Bitcoin would have vanished from existence like the Beenz and Flooz marketing currencies did. Mexican 500-peso coins stuck around long after the government dropped three zeroes off the currency, because they were size that parking meters were designed for during a few years of financial stability. There was one board game that used Nicaraguan 50,000-cordoba bills, because you simply couldn't print Monopoly money that fancy for what they were worth.

Ronald Reagan's "conservative" economics probably only inflated the US currency by a factor of 3-4, and wiped out most of the increase in the US national debt as well as a lot of personal savings. My first retail job paid a minimum wage of $1.60/hour, and the US minimum wage didn't keep up with inflation except maybe for a few cities like San Francisco that have higher-than-national minimum wages, but also have rents which have significantly exceeded inflation.

318:

To ask the question a different way; what properties would we like a digital currency to have? Suppose we wanted a currency in which tax evasion is impossible, that treats individuals and companies on a roughly equal footing? Could we build a crypto currency that makes taxation of revenue automatic and verifiable? Maybe the pragmatic solution is to assume bitcoin, litecoin and the like will be used nefariously, and tax conversion to and from bitcoin at ~30% to offset the costs of social problems it will create, then let people do what they like with it once they have it.

The main reason why bitcoin will never be more than a curiosity is because the courts won't enforce debts owed in bitcoin, and bitcoin can't be tendered for a debt. If I owe someone money, they could take me to court, and conversely if I offer to pay a debt with legal tender, the debt is discharged and the other party has no grounds to sue. Of course, no one is going to take you to court over pocket change quantities of money, and no one can take you to court if your only reason for holding bitcoins was to buy illegal goods.

Bitcoin is always going to be restricted to trivial items in which you could afford to be ripped off occasionally without it being a disaster, and for drugs and contraband in which recourse to the courts could never be an option. I predict we'll never be able to buy a house or a car directly using bitcoins (without converting them to legal tender).

319:

Why call them Bitcoin then? loving the book as i read through it BTW

You are going to get lynched when the BTC circle jerkers arrive i mine myself but try telling them anything other then BTC is the best thing since sliced bread and out come the picthforks.

BTC will never replace the big currency's but provides a digital way of anonymous transactions so of course will attract drug sellers, filehsaring sites etc. It could continue on or die in a tulip mania (anyone remember netbeans) unfortunately a lot of the good points get drowned out in people price speculating and being general dicks.

On the carbon footprint that is coming down all the time as ASIC based equipment is being made. What i find interesting is that if joe start up can make SHA-256 smashers what about the alphabet agency's? they can effectively create a private BTC test net and as long as it matches the same power could effectively create a mirror to show where transactions are going. Remember they the whole EFF DES debacle?

Personally though i think the carbon footprint point is moot. Large banks have hige data centers running inefficient kit (i have been in a few!) and it is too volatile as a store of wealth for tax evasion at the moment.

320:

France is not a socialist economy. Not even remotely.

Just because the party in power is called "socialist" does not make France a socialist economy -- just like the US so-called "conservatives" can display astonishingly innovative takes on some issues.

The fantasy that France is a "socialist country" whose economy is on its knees is a USAyan right-wing canard that has all the merits of the views that French old communists have on the USA. Namely, if I had a cent for every time a French predicts the collapse of the USA within a few months, and a eurocent for every time a USAyan predicts the imminent collapse of France, I would have a great many euros and a great many worthless dollars.

321:

Not that good, €1.37 = $1.00 today, but the basic point is sound. A €500 banknote is a big lump of cash, and it is associated with a lot of curious uses.

The 500 Euro Note (Wikipedia) looks to be a good, if slightly dated, summary. There are reported to be a huge number in Spain. And what of Cyprus? The banking crisis has been linked to Russian tax evasion.

As far as money laundering and anonymity go, Bitcoin and physical cash face the same problem of transfer into the mainstream virtual currency system. I suppose you can see it as a sort of phase-change, like water to steam.

322:

The status of Bitcoin in the courts might not be as flimsy as you think. There is statute law on financial instruments (always on the fiddle, eh?) and contracts which doesn't explicitly include Bitcoin, but Contract Law depends on an exchange of value. I reckon the lawyers would do well out of any dispute, but Bitcoin is not outside the remit of the Courts.

"Legal Tender" is a term which can be misunderstood. To pull the trick you seem to be thinking of, you have to offer payment in physical cash. So a stack of $100 bills is legal tender, a bankers check isn't.

The concept is part of the idea of fiat currency. Historically, in the days of gold coin in circulation, it was part of what made copper and silver coinage possible. In Victorian England, silver coin did have a bullion value, but the law on coinage set an artificial value, and both silver and copper coin were legal tender only up to a specific maximum value. Other countries had silver-based coinage. Switzerland, Italy, Belgium, and France had currencies based on a silver coin of the same size: the Eurozone is nothing so new.

(And then we get into bi-metallism and the political sub-text of The Wizard of Oz: does Bitcoin have an equivalent of the Yellow Brick Road?)

323:

Another alternative is that this is just another attempt to make 'Money' real in people's heads, when in fact money is not real. It is an artifice used to make people think they are giving and receiving value for their work. Money is a talisman that has you under it's spell. You think that's silly, go burn some money fool, I dare you too. Burn it right down the serial numbers if you must so you can go try and redeem the serial numbers for new bills. You wound't even do that for the fear that your captors represent in your mind. In that respect it also a fear based taismanic system, so it has two layers of control built into it. BtC is silly, gold standards are silly and all forms of currency are silly, especially when you attach a debt system to them. But don't let me rain on your parade of self indulging masturbatory intellectualism, go on and prop up more fallacious notions in your heads and reinforce those ego attachments, it's not like your alone in that endeavor. And no I will not be reading replies and responding to this comment because it is fruitless, the dead are the dead and they have no thoughts of their own.

324:

The classic communist idea is "from each according to his abilities, to each according to his needs".

Which is to Leninism as The Sermon on the Mount is to the Roman Catholic Church. Hint: Leninism purports to be a shortcut to achieving communism, through specific strategies -- such as the leading role of the Vanguard Party, seizure of power, rule by decree, forcible expropriation of private property, etc. -- all in the name of achieving an equitable distribution of Jam Tomorrow for Everybody. (Which looked fine and dandy right up until it ran into the thorny question of who exactly made up the Vanguard Party, and what their motivations were.)

As Professor Keynes pointed out decades ago, we should already be so productive that we could get by comfortably -- fed, clothed, housed, and with a modicum of shiny toys -- on an average working week of 5-10 hours. Instead of which we're heading into an automated grim meathook future where those with jobs work as many hours as they can to prove their worthiness, and those who don't have jobs are left to rot. Gearing our sense of self-worth against financial prosperity is a major problem in our society (and one that Marx noticed: while his prescription was very vague -- he wasn't terribly interested in running society, more in diagnosing what was wrong with 19th century industrial capitalism -- it seems to me to have focussed more around achieving a halcyon state in which nobody exploited anybody else's alienated labour and everybody got to do what they wanted).

325:

Not that good, €1.37 = $1.00 today, but the basic point is sound.

Err, you wish ;-)

€1.00 = US$1.37

327:

The classic communist idea is "from each according to his abilities, to each according to his needs". This is a simple expression of two disconnected, uncontrolled systems. Some workers will end up working themselves to death, and those who are good at 'needing' will acquire an infinite amount of goods.

I don't think that's a sound interpretation of this idea. "Working to death" definitely isn't the same as "according to his/her abilities". Instead this means that more able individuals are supposed to produce more according to their enhanced abilities.

Likewise, "to each according to his/her needs" means that everyone's basic needs should be met independently if they find a job or not. It does *not* mean "to each according to his wishes".

Lenin is also attributed with the quote "who doesn't work shall not eat", which is not something I would agree with.

328:

#321 and #325 - I was trying to convert between Euro and US$ using UK£ to $currency tables, in my head, at 00:24 local. Yes the error is there and mine, but the point stands that it's a suspiciously large single note to offer in a transaction.

329:

I don't think that's a sound interpretation of this idea. "Working to death" definitely isn't the same as "according to his/her abilities". Instead this means that more able individuals are supposed to produce more according to their enhanced abilities

With the note that it also means that if labouring is all you're competent to do then you must be a labourer, but if, say, you're a good software engineer then you get to do that instead, chemists get to do chemistry if there are chemistry jobs available (and something else requiring literacy/numeracy if there aren't)...

330:

cath3ik at 320,

When assorted people make pronouncements of the impending collapse of the Uu to me, i remind them that the Euro was valued one to one with the dollar when it was introduced, and suggest they take a look at the exchange rate now.

This has made me very unpopular in certain quarters with certain people.

331:

FWIW:
I was born in Scotland. I have scots ancestry of approximately average levels of tightness (tho my dad always said "never fuck with the taxman... right up to the day he died of a lung cancer mostly purchased from same).
I am very much a big-government, social-safety-net for all left-libertarian chap.
And I love Bitcoin.
And I see no contradiction in that.
Because it is not going to drive out fiat.
Because it is not going to noticeably damage governments' ability to sell bonds, and pay wages in fiat, and impose currency controls as required.
Because it provides basically zero facility to be evil that the real bad guys don't already have with their laundered cash and their numbered swiss bank accounts.
Because it is an innovation and a competitor in a field with few innovations since the Medicis, and it may kick off an era of innovation that benefits everyone (Chiemgauers are cooler, but who uses them...)
I'm gonna respectfully disagree 100% with Charlie on this one.

332:

There's some point in that, but the biggest issue with the Eurozone is that there are too many too weak economies in it. If, say Greece and Italy could be expelled from the Eurozone, the currency would be significantly stronger.

333:

Paws4thot,

To be sure. but simply forcing certain people to look at the issue rather than allowing them to shelter in the hermetic bubble echo chamber is often considered a spirited defense of the euro, it seems.

334:

I agree your point about the present exchange rates; I was looking at the underlying issue(s) around why the Euro is not stronger.

335:

Paws4thot,

Indeed. But there is perfect and then there is good. And I glumly think that the EU may be in better long-term shape than the USA.

336:

@302:
Bitcoin is like cash except with an important difference: Bitcoins do not take up physical space.
---
I've talked with several people who bought gold and/or silver, for a hedge against inflation, shtf, whatever.

When I ask whether they bought bars, coins, or wire, they start telling me about the certificates they bought online somewhere, which assure them they are really the owners of some physical gold, somewhere. But they've never seen it, and don't know where it might be found.

Further questioning usually results in a "failure to communicate" session.

But, like Bitcoin, I strongly suspect their gold has no physical existence other than the hardware it takes to instantiate it in webspace...

337:

@272:
The trick with taxes is to make them:
a] Progressive
b] Fair
---
Born to fail, since progressive taxation is unfair by definition.

A "fair" tax would be to take the budget, divide by the total of the population (including the aged, infirm, prisoners, and children) and tax them all equally.

Very few people seem to want that much fairness.

338:

#336 - For me that would depend on the name of the dealer who issued the bullion certificate. There are reputable bullion dealers as well as crooks, just like there are in more or less any other business you care to name.

339:

#337 - Let me quote from Adam Smith's "An Enquiry Into the Nature and Causes of The Wealth of Nations" in answer to that nonsense.
He said (possibly slightly paraphrased by me) "A Poll Tax, if rigourously enforced, would be highly efficient to collect. It would not, however, be proposed by a government who took good account of the people."

340:

Looks like the US-based online retailer Overstock.com is planning to start accepting Bitcoin in 2014:
http://www.ft.com/intl/cms/s/0/d5f2f096-6907-11e3-996a-00144feabdc0.html?siteedition=intl#axzz2nxTQGoVT

The decision was made by the CEO, based on his own political beliefs:

“I think a healthy monetary system at the end of the day isn’t an upside down pyramid based on the whim of a government official, but is based on something that they can’t control,” Mr Byrne said.

341:

Damn, this is a depressing discussion. Apparently I'm an idiot who, instead of feeling all pleased with myself for pulling my money out of Iceland just days before the crash, should have been putting it into Bitcoins instead.

Oh well - I'm sure that it won't be the last opportunity that I miss. These days I mostly put my money into guns and valve amplifiers, as they are commodities that reliably appreciate in value.

342:

I tend to be of the Max Keiser school of thought. The world's financial system is a Ponzi scheme run by some few super-rich, in collusion with States, via central banks.

The super-rich like it because they can cream off debt repayment when it's at it's highest value, States like it because they can use it to indenture future generations to pay for their cloud-Cuckoo-land vote-catching promises du jour.

It's the primary source of the peculiar phenomenon of us living in a world of abundance but still feeling like we're on treadmills. Basically, the extra value we produce is stolen from us, in a way not too dissimilar from the Marxist idea of stolen surplus value (but Marx laid the blame on private property in the means of production - i.e. capitalism - per se, whereas the blame in fact lies in the collusion and cronyism of government and big business, i.e. it's more a fault of perverse incentives set up by the State, in the first instance, and as a system it's as old as the hills, it just works to enslave us all more efficiently - becomes more salient - with higher technology).

It's also the primary source of consumerism run rampant - basically more has to be gouged out of the earth to satisfy the debt monster, and our psychology messed with, and statistics mismanaged and massaged.

Anything which breaks this debt system is bound to be good.

Bitcoin is not The One in this regard. Nothing is The One, and the end of the old system will come by a thousand cuts - by, e.g., the large pension funds and large capitalist stakeholders diversifying portfolios, avoiding the bond market, and using other forms of money in general, and holding more and more transactions outside the system.

But Bitcoin is a helper in this regard - part of the solvent. I look forward to other forms of digital money in the near future. Caveat emptor and may the best one win.

343:

But from what I've read, Marx recognised that the state was basically just capitalists in charge of everything, so I don't really see how you differ.

344:

" ... Suppose we wanted a currency in which tax evasion is impossible, that treats individuals and companies on a roughly equal footing?"

Good question -- from the posts I've read here, it seems that the BitCoin transactions are like regressive taxation ... because of the fixed cost per transaction, anyone with a small number of BitCoins, ends up paying a huge premium (percentage-wise) on anything they purchase/trade. And any large corporation/trader of BitCoins actually ends up winning (making money) just by amassing large quantities of goods and then trading them out piece-meal so long as they sell at slightly above the transaction cost.

Interesting distribution-channel effect.

345:

As far as I can tell, the Eurozone was more or less the world's very first empire-by-stealth, created to prevent the Second World War breaking out ever again. To be fair, WW2 will not ever break out again, but it won't be the Eurozone stopping it.

The main problem with the Eurozone is corruption: the entire edifice is corrupt through and through simply because of the way it operates internally; it pulls in huge volumes of tax (raised in part by the drastically flawed Value Added Tax; see also Carousel Fraud) and then pushes this money out again; in the middle quite a lot tends to go walkies in strange and mysterious ways.

The Eurozone is also a bureaucratic paradise; the very deepest tenet held there is that the fundamental basic building block of the universe is paperwork. If the paperwork is correct, then everything must be correct; the recent horsemeat scandal ought to be a lesson in why this is a daft idea.

Combining Bitcoins and the Eurozone won't fix either; they're both broken by design. To my mind, the term "dodgy as fuck" is the best way to view Bitcoins, which is why I do not own any.

346:

Ok, I didn't previously have a definite position, but I now say we dust off and Nuke the site from orbit. It's the only way to be sure!

347:

Dear AItOawkhqNwupf5SV3SbmWfKf2SXvMI0WLKaQzk

I think you may have confused the European Union, which has developed over more than 60 years, through a series of agreements on, initially, trade, and extending to a directly elected Parliament representing a population of half a billion people, with the Eurozone, a group of 17 countries, mostly within the EU, with a population of 332 million.

And you speak of a slow-to-act system of government as though it is bad thing. Some would beg to differ. And, just between you and me, we have rather a lot of Socialists in Europe, and rather a lot of state intervention in such matters of health care.

Yes, not having another war in Europe is something we are inclined to feel strongly about. Every time we Europeans raised a standing army, we started having wars, and we have realised that there are better things to do with our wealth. Every major Army of Europe has, at one time or another, crossed the Rhine. Even the Russians.

We have decided it was getting tedious.

348:

Additional note on this - The EU is actually a bloc of 27 nations, by which I mean countries having their own representation at the United Nations, at this time.

Obviously, not all of them are also in the EuroZone.

349:

I don't see how the EU is particularly corrupt. At least compared to Russia, China or the USA, it seems to be doing fairly well on that respect. Yes, the European Union is a large continental empire; not only is it a contemporary and promising one, but it is also the only empire in history to have risen purely peacefully. It is ruling half a billion people and counting, and you expect no bureaucracy? Bureaucracy is a good thing; the opposite of bureaucracy is Somalia.

In its entire existence, the EU has not launched a war of aggression, and it has not lost a war either. The USA have managed to lose two in the last decade.

If anything is wrong in the EU, it is actually that its members keep playing petty them-against-us games, country against country: Germany running an export economy to the expense of Greece and then moaning that Greece runs a deficit while she is doing so well; the UK building its little xenophobic surveillance dystopia and acting on behalf of her US masters; or numerous other instances of the same flavour.

Blaming the EU because things are not ideal is 1) neglecting that it is not doing so bad at all (and consistently reinforcing itself with each crisis, has anyone noticed? The Ukranian seem to have...), and 2) blaming problems on something when the solution is more of that thing.


350:

Para 3 - I may have mentioned this earlier, or on another forum, but the issue with Greece, Germany and the Euro is that Greece can not afford to maintain a 1:1 exchange rate with Germany, or maintain the same growth rate, but has ceded all the economic controls that allowed the 2 nations currency to float relative to each other.

Para 4 - You've implied this but not said it, but the EU actually has nations (Turkey and Ukraine for sure) actively applying to join up.

351:

TRX @ 337
I call TROLLING!
Progressive taxes ARE fair - they take more from those able to afford it, & less from the poor.
Or do you disagree?
If so, expect several commentators ( & possibly OGH) to dump on your head ....

352:

cath @349
The EU is fundamentally corporate-corrupt.
The directives concerning EVERY DAMN THING are arrived at by lobbying from really big business, to everyone else's detriment. Corporate statism, in fact, & not nice. It's also turning into a big employers' ramp, with "guaranteed minimum wages", but really low ones for most people.
The Gini coefficient is going the wrong way across a lot of EU states, both inside & out of the Euro.

It started out so well, too!
I was strongly in favour from before I left school (1964) until about 3 years back.
Now, I've changed sides, and think it's fucked, & that Britain would be better off out - like Switzerland & Norway ....

353:

the UK building its little xenophobic surveillance dystopia and acting on behalf of her US masters
Many members of the Intelligence community would laugh hysterically at the thought of the French complaining that other countries were abusing surveillance techniques to the benefit of national interests...

354:

The European Union's bureacracy is actually tiny, a few thousand employees or so including the janitors and tealadies. Most of the work of the EU is carried out by staff seconded by the various nation states and doing what their national governments tell them rather than adhering to some kind of EU hivelike supermind that outsiders (and especially Americans) assume it to be. Mostly it's a talking shop.

As for the Rhine-crossing measure of peace, it is currently sixy-eight years since the last such reset of the counter in 1945. That is the longest period of peace known going back to Roman times; the records are spotty once you go past 300 B.C. or thereabouts.

355:

A "fair" tax would be to take the budget, divide by the total of the population (including the aged, infirm, prisoners, and children) and tax them all equally.

Aye, and it's only fair that it's forbidden for rich and poor people alike to sleep under bridges.You might as well define a "fair" system where taxes are proportional to age or height.

356:

The directives concerning EVERY DAMN THING are arrived at by lobbying from really big business, to everyone else's detriment.

You think that's different in the US or other states? Or multinational orgs like WTO?

357:

When did the Russians cross the Rhine? Was it in the Napoleonic wars? I can't think of any other time when actual Russians were pootling about western Europe.

358:

Hm, going through the list of invasions, maybe Antonia is talking about this:

http://en.wikipedia.org/wiki/Anglo-Russian_Invasion_of_Holland

Technically, the landing was west of the IJsselmeer, where the Ijssel is part of the Rhine delta.

359:

If Von Neumann machine (Maker-Bot on steroids style) autonomous robots that were solar powered started mining Bit-Coins, how long would it be until we humans became irrelevant entirely?

360:

This post has gone viral, you know. And, I finally got around to croaking out some thoughts on the matter. They're up on my own blog, but here's a copy for you-all.

It's troll's gold—a curse to the holder, and to those who desire it. It's deflationary, which means it's an inherently poor currency to do business in; it comes with a built-in sales tax. It provides an incentive for employers and debtors to delay payment as long as possible. It's money that comes with a built-in discouragement to exchange, and half the work of money is as a medium of exchange.

Science fiction writer Charlie Stross brought this up on his blog, and the post jumped the science fiction ghetto wall—it got cited on /., and David Atkins over at Hullabaloo picked it up.

And, yes, Bitcoin could become a problem. It was intended, after all to implement both the crypto-anarchist and goldbug agenda. But, really, isn't this what the biggest global banks have already done? Finance, beyond the control of the most powerful governments, and corrupting those governments. I do not think Bitcoin could make matters much worse, in that regard. Yet…

There's a dark side to Keynesian economics. Keynes-Hicks models provide tools which hold out the promise of an economy without booms and busts, without bubbles and depressions, without a 1%. Conversely, though, Keynesian management can be used to enable an aristocracy, to insure that money will only be a store of value who are connected with the people who run the system. A new tool of class oppression, in other words.

But there's a deeper darkness. Without the "somewhat comprehensive socialization of investment" that Keynesian economic management requires, a money economy is like a climate system, with arbitrary and unpredictable weather, vast storms, freezes, booms and busts. And that is what crypto-anarchists want to make a permanent condition.

Well. I do not think that is too likely. But a new aristocracy? Is that not what a faction of the world's very wealthy are working to create?

361:

VAT specifically is actually a pretty well designed tax, it's essentially a better designed sales tax. The way in which it is paid at multiple levels and then claimed back acts as a self-enforcement mechanism, any evasion not at the final stage gets revealed when the business purchaser attempts to claim back the tax. If there is evasion at the final stage then that business has already paid a large part of the total tax due so the amount evaded is relatively small. This means that a VAT can be levied at a substantially higher level before tax evasion becomes a serious problem compared to a simple sales tax levied only on the final sale to the consumer (somewhere above 20% as opposed to about 10%).

362:

What it comes down to is that if the average person ignores Bitcoin, it will never hurt them (apart from being a way for shitstains to launder money in ever-more-limited ways) because it doesn't really make sense to borrow any amount denominated in _any_ deflationary asset. What that means is that it can simply never grow to take over any real currency system. That's why we haven't really had a strict gold standard in nearly a century and why we haven't had _any_ gold standard for 40 years.

And as you noted, Bitcoin escalates the stakes without _any_ brake for the wastoids and griefers that feed off the amateur investor so it will mostly be the participants who are hurt as well as anyone who does business with them. It's the self-generated endgame for pseudo-libertarian idiots at the hands of the kind of people who have always preyed on them: scam artists.

Long term, as long as the exchanges continue to operate Bitcoin will remain a non-real-but-tradeable asset with a value that varies wildly. Like penny-stocks it will be a toy for market fiddlers and cranks. It will never be a useful currency. As a contrast to state currencies it will only serve as a cautionary example of an alternative.

363:
Many members of the Intelligence community would laugh hysterically at the thought of the French complaining that other countries were abusing surveillance techniques to the benefit of national interests...

1) If you are saying that to push back at me, I have never indicated that I am French or that I have any sort of loyalty towards France. I just happen to know the country better than some here and I take the liberty of interjecting when things go totally at odds with reality, for the benefit of those interested in things that are not completely faith-based.

On the other hand, I can disclose that as a non-UK citizen, I am an unabashed anglophile -- Savile Row suits, British-designed furniture, as-good-as-I-can-manage Cambridge accent, the whole nine yards.

2) Many accusations against the French services are impossible to verify, and emitted at convenient times by rival powers caught red-handed. Caveat emptor.

Now that we have cleared issues of form...

3) France is very comparable to the UK in terms of pervasive surveillance and in terms of submission to the USA. On the second point, France maintains a facade of independence, while the UK is more or less officially a US missile base, but the intelligence services and the military are tied to their US counterparts, and the politicians are utterly servile. The affair of Morales' plane was utterly sickening, and speaking of planes, despite her protests of purity on matters of torture (at least since 1962...), France was involved in CIA renditions. France has a surveillance programme of its own citizens that the DGSE itself calls "a-legal" (because, see, it's not illegal as in "explicitly forbidden", and under certain interpretations of the mission statement and of the law, you could come up with excuses that could convince John Yoo, David Addington and Dick Cheney).

But that was not exactly the point I was trying to make. These things are common to France and the UK. But to these things, the UK adds an explicitly xenophobic ruling party (deportation add truck, will to limit immigration from EU citizens -- though on that respect France is doing great with the treatment of Roma), an overt surveillance society complete with pervasive cameras and trigger-happy cops that forbid citizens to take photographs for no discernable reason, and the political will to question EU membership and even the fucking Human Rights Act.

France has a history of using repugnant means, some of which directly threaten democracy itself, and she has a tendency to short-sighted self-serving positions that weaken the EU construction. The UK, I believe, have jumped overboard and are now hesitating only on how to balance their hatred for EU membership and the harm they can cause her from inside.

I love the UK, I really do. But my impression is that it would be better off leaving, go on a honeymoon with the USA, and come back in 60 years after seeing the consequences.


364:
The EU is fundamentally corporate-corrupt. (...) The directives concerning EVERY DAMN THING are arrived at by lobbying from really big business

That is just not true. Big business has a bone in that game, obviously, and their bark a lot. And the occasionally fail. See how it turned out for ACTA, for instance.

You might deplore certain decisions, or find the balance unduly tipped on one side, and I would listen to you -- potentially agree. But saying that the EU is fundamentally corporate-corrupt is pushing the caricature beyond recognition.

The Gini coefficient is going the wrong way across a lot of EU states, both inside & out of the Euro.
The Gini coefficient is going tits up everywhere in developed countries. That is a side effect of globalisation and deregulation -- which, incidentally, is a global trend whereby developing countries and transition economies are catching up with developed countries. The fundamental, underlying process is not only inevitable, it is a damn good thing to happen. It just so happens that we have a political trend of post-thatcherite short-termism that makes the process more traumatic that it needs to be for the populations of developed countries. And in that respect, the EU has a massive stabilising and mitigating influence. Like many eurosceptics, you are blaming the plaster cast for a broken limb.

The problem with the EU is that it has become a convenient scapegoat for politicians implementing unpopular policies: "I did not mean to put that legislation that happens my big-business pals, the eeeeevil European directive (that actually stipulates a much weaker subset of the measures) made me do it". And the other trend is the "spoiled brat" effect, whereby some become so obsessed with the differences between the actual and the ideal EU that they lose track of the fact that the EU is not bad at all in the absolute; if you do not believe me, go ask people who are in a position to compare the EU to other spheres of influence, like in Ukraine.

like Switzerland
Switzerland works in part by annoying nobody too much -- it's "do no harm" side that gave us some international institutions and the Red Cross. It is also a cynical, self-serving and arrogant little European province that is in fact subsidised by the rest of the world though tax-dodging schemes and has the cheek to go tell others how they should behave (reality check, Heidi, if everybody was a tax haven, everybody would be poor; you are so rich because others do not behave like you).

Switzerland is out of the EU because it serves the interests of a minority of tax-haven bankers and of a handful of illiterate xenophobic peasants in the tiny original cantons, whose political power is disproportionate; last time it was asked, the majority of the population wanted to join the EU -- the country was kept out if it by the same sort of electoral bugs that have given us Georges Bush Junior for President of the USA with a minority of the electorate. The "real economy" (based on manufacturing things and offering services of intrinsic value rather than side effects of national borders) is overwhelmingly in favour of joining the EU.

The Swiss model works because Switzerland lives in extremely particular conditions -- small population, very small territory, huge cash flow, relative isolation, neutrality and detachment from the affairs of the world. I am not convinced it is the best possible model for Switzerland herself, and I guarantee that it would be a catastrophic model for a regional power.

365:

But that was not exactly the point I was trying to make. These things are common to France and the UK. But to these things, the UK adds an explicitly xenophobic ruling party (deportation add truck, will to limit immigration from EU citizens -- though on that respect France is doing great with the treatment of Roma), an overt surveillance society complete with pervasive cameras and trigger-happy cops that forbid citizens to take photographs for no discernable reason, and the political will to question EU membership and even the fucking Human Rights Act

I think you're referring to how the Con party is letting its foreign and immigration policy be led by the "Daily Heil" and the crypto-Fascists of the self-styled "UK Independence Party".

Personally, I do have some concerns over the EU, but those reflect a feeling that the original idea of a free trade zone with minimal border and immigration controls is suffering from advanced feature creep.

366:

The EU is not a free-trade and free-circulation zone. You are referring to the Common Market. The European Union is a proto-superpower currently in its aggregation phase.

I believe that it is a fundamental British misunderstanding to see the European construction process as aiming to institutionalise the dynamic equilibrium by which the UK played France against Germany to ensure that nothing coherent emerges in Europe. That is not the case. We want a modern, peaceful and enlightened superstate in Europe, which entails a political backbone to it. Which is needed to promote things like Human Rights and sustainable development, which you obviously cannot trust to Western countries -- and much less to other large powers, which will inevitably grow in influence as the dominance of the USA declines over the 21st Century.

367:

@ 356
Of course I don't think it is different in kind.
But I do think it's different in scale & influence. It is becoming very pervasive & a real nuisance.

[ guthrie @ 357
Imperial Russian troops arrived in, or just outside Paris in 1814, IIRC ]

cath @ 364
When corporate EU decisions, taken for the specific benefit of certain agrobusiness giants then detrimentally affect small, privete growers, allotment holders & home gardeners (And/but ... similar cases can be cited across all areas), then one sits up & takes notice.
This is entirely about corrupt profit & removing choice & freedom of action from individuals, forcing them into the rigged public "market".
What's not to loathe about this state of affairs?

Unfortunately, I agree with you about Gini coefficient, but I *think* the EU is making things worse - just my opinion, though.

Possibly correct about Die Schweitz, but I note you carefully ignore Norway?

368:

paws
OBJECTION!
You have swallowed the 3-party lie that all UKIP supporters are automatically disenchanted right-wingers, longing for the 1950's ...
You should meet the Old Labour voters down on the plots ... who have all turned (as far as I can see) rabidly anti-EU in the past 2-5 years.
There are aspects of UKIP official policy I don't like, & I'd think VERY carefully about voting for them in a Westminster election { They have christianity, they want to cancel HS2 etc ... and our local - Labour MP - is very good as a constituency rep. }
But, come the Euro elections this Spring, I'm going to vote UKIP, quite deliberately, to give the other bastards a kicking.

Please also remember that there was, & is a perfectly valid Labour/Socialist objection to the EU, as advertised by Anthony Wedgwood Benn, too. One, that with which, in my increasing age, I find my self in greater & greater sympathy.

369:

Don't cheapen your article by typing TL:DR at the bottom of it! It contains some nice insight into the issues behind it all. On a related note, people need to stop being afraid of writing (and reading) essays - it's how intelligent commentary is passed around our society.

370:

It is true that agriculture has serious problems, but it is just one aspect of economy. If you want to see something really unhealthy, contemplate the relationships between oil giants and US politicians.

I am not saying that the European Union is an ideal paradise. I am saying that it is the closest thing we have to it, and that it is therefore logical to work on that, rather than on things that are proven failures (like the French or British Empires, who not only failed abysmally to live up to their humanist values, but are now completely gutted of their power).

I have never lived in Norway, so I chose not to comment on that I know not. The only thing I can say is that Norway is obviously not a superpower; and that is what we need the European Union to be.

371:

Utterly huge clue - The organisation which the UK joined in the 1970s was called the "European Economic Community". The one which we held a referendum on staying in, where most people voted in favour, was still called the EEC.

It did not claim to, for example, have powers to over-rule the member nations highest courts.

372:

Greg, this is my opinion, based on how the leaders of UKIP present themselves in public. I trust you noted the associated reference to the "Daily Heil".

Here in Scotland, we don't believe that that Little Englander 1950s ever existed!

(I'd agree with you about Xtianity, cancelling HS2 etc being bad ideas)

373:

You're going to have to define 'superpower' for us, because the one I think of when you say that has killed millions of foreigners for fun and profit over the last 60 years and exerted a baleful influence upon development in the 3rd world. Presumably you'd like an EU superpower to be nicer and fluffier, but the question is how to achieve that, given the limitations on the EU and the internal problems it has.

374:

Greg, Norway's prosperity has nothing to do with whether or not it's in the EU. Norway is rich because it has more North Sea oil and gas than the UK, and less than a tenth of our population.

375:

Well I think that the answer lies within your question: "the limitations on the EU and the internal problems it has". These should prevent it from turning into another China or Putin's Russia. As for preventing it from turning into another USA, I would count on differences in culture and history (memory of suffering from wars, memory of making others suffer and reaping what they sowed, different legal system, different attitude towards Science and Jeezuz, absence of a Presidential institution aggregating power over decades, geographic proximity to different cultures, etc.).

376:

A good example of how the principle of commensiality works in relation to the EU and its memberstates is here:

EU makes laws detrimental to allotment owners and beneficial to agricorps.

If westminster wants to protect allotment owners, Westminster is fully entitled, empowered, and indeed expected to then pass legislature that overturns the EU law and sets national law in the UK to something it deems beneficial to allotment owners.

Notably, Westminster doesn't do this, so where does the problem lie?

It's why Cameron's nonsense about "renegotiating powers back from brussels" is complete nonsense - either he means the UK withdrawing from the european convention on human rights, or he means that he's going to present the UK with the very principle of commensiality that it currently operates on wrt the EU.

377:

Greg, your allotment problem is quite simple and nothing to do with the EU. It's valuable land in urban areas, made available to residents so they can have kitchen gardens. By definition, this land is NOT MAKING MONEY FOR THE CONSTRUCTION INDUSTRY, of whom Cameron is a very close chum (as, to be fair, were his predecessors). Defending the public interest against the nice friendly people with the bags of money isn't something you can reasonably expect a former PR-boy turned corporate shill to prioritize, so the passing of EU regulations on farming is used as a pretext in the UK for transferring wealth (in the form of land) to cronies.

You are (again) confusing your interests (allotments) with the national interest, as perceived by our lords and masters, who are passing the buck and blaming the EU, as is SOP.

378:

The difference is that the State definitely has some power and agenda of its own, which is contingent on the vote. The very early, classical liberal Marx recognized this, but the later Marx with his theory-mania forgot it.

Essentially, there is nothing wrong with capitalism per se - i.e. with the principle that the means of production can be in private hands. It actually doesn't matter who owns the means of production so long as they run them productively.

The evil always comes with collusion between a subset of capitalists and the State.

Mainly it's two types: the industrial and the financial. The industrial types lobby for new laws to restrict their competition, and the State disguises those laws as beneficial to the majority. The financial types keep the debt cycle going in a way that benefits the State first of all, them second, with everyone else further down the food chain effectively indentured to service the debt.

379:

[DELETED PER MODERATION POLICY -- corporate PR equivalent to spam]

380:

Lose money fast! Buy Bitcoin! (And exclamation points.)

381:

Inflation: prices rise, but they're able to do so because the money supply is also expanding.

Well not necessarily. Let's take out standard equation of exchange, MV = PT, where M is the supply of money, V is the velocity of money, P is the "price level", and T is the "real value" of aggregate transactions.

We see that if M is held constant, and T is held constant, it is perfectly possible for P (prices) to rise if V also rises.

We also see that it is possible for P to rise if the product of M and V is held constant and the real value of transactions shrinks.

So there really is nothing wrong with defining "inflation" as "a rise in the price of commodities" and "deflation" as "a fall in the price of commodities". Yes, moderate deflation leads to vastly more negative outcomes than moderate inflation (which is widely, and probably correctly, believed to be a good thing), but the outcome of something is not the same as the thing itself.

382:

Charlie
Sorry, but you are misinformed.
Nothing at all to do with building over useful agricultural land.
Everything to do with the careful allowance, after lobbying at EU level, that "industrial" farmers can use certain substances, & we can't - even though they are safe (If used properly).
Followed, immediatley, by a big-business attempt to stop private persons growing things - "because they spread plant diseases" - because we can't stop Blight (legally) any more.
A classic stitch-up, in fact.
There is now an attempt being made to freeze out small seed producers & exchange-arrangements, in a similar manner, again for the big boys' profit & restricting our choice.
The corruption is open & unchallenged, because we don't have the money.

383:

paws
I remember the 1950's - & I KNOW they didn't exist like that, either - nor would I want to go back - except for some rare steam traction over certain railway lines (ahem) ....

384:

Greg, ref Charlie's #377, what in your last replied to makes anything of that untrue?

385:

You say that, and I immediately think of working an A3 and a Deltic hard over Shap and Beatock.

386:

I am going to try and define "superpower", and please read carefully.

A Superpower is an entity with the resources to carry out very large external projects without worsening the comfort of its population. One example of such a situation is fighting a significant war on the far side of the world without weakening home defence, instituting a controlled war economy, or neglecting existing treaty commitments. Another example is putting a man on the Moon.

While these projects include significant investment in means of production; research and factories and training; the investment is not the primary purpose.

The Falklands War might qualify as such a project. It sets a lower bound, at least. Arguably, it was done with the residue of superpower status. Iraq and Afghanistan might count for the USA, though the economic effects on the USA look significant.

Can a country lose and regain super power status? Maybe it can.

This would imply that the UK was a superpower from the mid-18th Century until at least 1914. It might be argued that a credible invasion threat that forces special measures suspends the superpower status. Has the USA stopped being a superpower because of the internal security reaction to 9/11?

It's not just military force. Has the building of High-Speed Rail across the EU been a qualifying project?

387:

Some chemicals while reasonably safe if properly handled with appropriate safety equipment and training may by beyond the capabilities of a typical amateur to use safely. They may be highly toxic in the short term while being non-persistent or they may be explosive, or they may require specific follow-ups to remove residue or minimise the development of resistance &c. There are good reasons in various cases for restricting the use of some chemicals.

The prohibitions on the amateur use of certain chemicals has nothing intrinsically to do with the EU, it just happens that under the single market these kind of regulations are done at a common EU-wide level rather than national level. It is fairly likely that broadly similar regulations would be enacted whatever tier of government were responsible. The reason for doing it at an EU basis is that having slightly differing national regulations acts as a non-tariff barrier to trade so in order to get the full benefits of a large free trade zone it is necessary for most technical regulation to be uniform throughout the market.

388:

Greg, you maybe aren't aware of all the reulations which farmers have to follow to be allowed to use those chemicals.

We have to get training and get a certificate to prove we are trained. That includes demonstrating we know how to figure out the correct dose, and use the application equipment, and knowing the required protective clothing.

We're not allowed to store pesticides in the same building as foodstuffs, and there are a couple of other requirements to minimise pollution of, for instance, there is a fire.

Your typical allotment holder doesn't need to be trained or assessed, and is buying the pesticides in Tesco, dropping them in the same trolley as the weekly food shopping.

Some of the chemicals are the same, but that squirt-bottle with pre-mixed glyphosate weedkiller is on a whole different scale to those 25-litre containers of undiluted glyphosate the farmer handles.

And do Tesco provide the overalls and other protective clothing?

Incidentally, the sort of applicator used on an allotment needs a different certificate of competence from the applicators used to deal with a 10-hectare field.

I'm not going to deny the politics are there, but we farmers didn't get a free pass on pesticides.

389:

With recent revelations that the NSA paid RSA (the company) to build weaknesses into their implementation of RSA (the cryptosystem), does anyone really think that the cryptosystems at the heart of Bitcoin can be relied on? And would anyone be happy to trust a change?

390:

A lot of pesticides are very similar to chemical-warfare agents, indeed a plant manufacturing agricultural pesticides can be easily reconfigured to produce a range of military-use chemical nasties with the same feedstocks.

I wonder if there's a kitchen-top conversion process some urban terrorist types might employ to convert glyphosphate or other organophosphate chemicals into something that could be used in a dirty bomb? Poison a few hundred people, kill a few dozen, get some Tesco vouchers and lots of publicity for the Cause. After that Greg would have even more problems getting some weedkiller for his allotment off-the-shelf.

391:

All these bad EU laws that our politicians complain about have been enacted into UK law by these politicians. And then they want us to leave the EU and trust them to enact good laws.

392:

Corporate capture of regulators happens at whatever level is cheapest for the corporations involved - in the context of europe's many multinational agricorps, that's at the EU level.

Of course having said that... Westminster can still pass legislature to allow allotment owners to handle the chemicals you want. You might want to write to your MP about it (or an anti-EU tory backbencher), see what happens. Get some other allotmenters who are upset about this to join you in doing so.

The anti-EU wing of parliament has more clout and power to make primary legislature than it's going to have for a long while, so now's the time to act.

393:

#387 and #388 - Greg and I both have immediate family who worked in the explosives industry. We know about "dangerous" chemicals thank you very much.

I think we'd agree that the most dangerous chemicals are those held by people who think they know it all because they've been on a 1 week training course.

394:

Almost all terrible reasons to hate Bitcoin.

Personally, as a libertarian, I think bitcoin has problems operating as a currency due to it's volatility. Currencies need to be stable in value to work.

But the idea that it's bad because it makes it hard for the government to prohibit certain kinds of transactions is idiotic. You're just saying "bitcoin is bad because libertarians like it". But cash is equally untraceable. It's not like you can't pay for assassination with cold hard US dollars. Or child porn. Or drugs. All bitcoin does it is makes it difficult to associate your bank account and name with an online transaction. So government can't have a perfect record of exactly who bought what over what website, forever. The horror.

As for the central banking thing, it's quite a perfect experiment to see if you really need a human political agency to be making decisions about when to increase the money supply, and who to give it to. A currency like bitcoin could just as easily increase the mining rate according to some formula in order to stabilize the currency's value, or circulation rate. And disctribute the currency equally throughout society, instead of handing it to large investment banks at a 0% interest rate.


395:

Ok, I'll bite, since I'm here.

2) Well done; you've diagnosed a problem that's been brought out several times already in the comments.

3) Er no, cash is not as untracable as Bitcoin. Or did you just seriously suggest that I can legally scan a bank note and print my own? Or maybe that people actually do pay for assassinations et al over the unterweb using credit cards?

4) Given Bitcoin's notoriously unstable exchange rates I think it's well demonstrated that some management is necessary. Given that a person claiming to be a managing miner has claimed that the present mining algorithms are what they want, personal self-interest apparently doesn't work (at least as well as political agency).

396:

Charlie, totally agree with your view on bit coin. Economically it is irrelevant - a dangerous toy that will be used by criminals and speculators.

We live in a corrupt system where we have allowed the most corrupt people in the world (investment bankers) sole control of the most important control levers of our money supply.

Other than coins and notes which only represent 3% of the "money" in circulation banks are the sole agencies able to widen or contract our money supply. This is what causes the business cycle - the banks lend and lend and lend widening the money supply until inflation picks up and then central banks raise policy interest rates until the banks stop lending and growth slows. If central banks don't do this in time as in 2007 then we get an balance sheet recession as all the banks go pop. This is because we have completely failed to regulate banks and they can lend out 30-40 times as much as they hold as deposits. If the value of the collateral they lend against drops by only 3% then the banks go bankrupt and our economies crumble.

After 2008 banks were still so crippled they wouldn't lend. Hence we wobbled on the edge of deflation. Catastrophic for citizens and shows up in our falling living standards.

Allowing banks to Widen the money supply in this way is obviously insane and in the uk we miss out on tax revenue of £200bn a year by not taxing these operations. What we need is either to regulate banks properly so the money supply widens based on the needs of citizens and not oligarchs or a democratically regulated money supply controlled by our elected governments.

Government spending is the other way to regulate the economy if we insist on persisting with allowing bankers free reign over our economy. Governments are never resource constrained. After 2008 governments should have stepped in to spend and widen the money supply to replace the lack of lending by the crippled banks.

Governments aren't resource constrained and government debt can always be cancelled at will with no adverse effect. Governments spending can crowd out productive private sector investment and cause inflation but neither of those conditions apply at the moment. We have 5 million citizen under-utilised and images are falling. The money supply is not expanding rapidly.

The uk government should immediately cancel 40% of its debt - all the gilts held in the Asset Purchase Facility and should embark on a program of public spending and infrastructure truck tree modernisation until unemployment is near zero and wages are rising again.

If then we start getting inflation interest rates can be raised and then after that banks should be required to hold greater deposits to cover their risky lending. Only after that should governments back off from investment programs..

Of course these things won't happen. Our current Tory government gets 50% of its funding from bankers and the rest from people who benefit from austerity - lower wages mean greater profit margins to these "people". They also get to buy up whatever profitable buts of the public sector are sold off at A song.

We live in an evil and corrupt society.

397:

Allow me to worry you.

Do you hope to retire some day? If so, do you take advantage of the tax breaks of a pension fund? If so, then part (an increasing part as you near a likely retirement age) of your personal fund, and most or all of any annuity are or will be based on Gilts. Your idea has just trashed the Gilts market, and hence the annuities market, and hence your retirement income.

398:

We'll that doesn't work very we'll does it? When gilt yields are lower than inflation (as they have been for last 6 years) this guarantees that pension annuities have real terms drop in value.

If pension funds can get yield from gilts they will be forced to invest in equity to provide return. I would rather my pension was based on investment in companies that employ people and provide useful products than being subsidised by tax payers.

Gilts are a hangover form the Breton woods era and perform no useful function in economic systems without fixed exchange rates.

399:

So would I, in principle. In practice, part of the reason for annuities being so strongly based on the Gilts market is to provide stability of the resultant income.

400:

The stagnation of the financial markets exemplified by the low return on Gilts is part of why we need a genuine boom. That's why corporate pension systems are failing.

I don't know that Keynes would work when the factories are in China. The money isn't going to circulate locally.

There's no way Bitcoin can be big enough to matter to the world, not without some multiplier mechanism. What might that be? I know, lets use Bitcoin to fund the assassination of bankers.

401:

Pension funds have always held diversified portfolios- gilt yields have often underperformed equities for long periods of time

http://www.thisismoney.co.uk/money/investing/article-2097825/Credit-Suisse-stock-market-returns-1900-The-24-year-spell-UK-shares-failed.html

Corporate bonds are also often better long term investments and don't rely on a tax payer subsidy.

402:

About the only reason I would buy any lol

403:

What is it with libertarians? We live in a world in unregulated trading has crashed the global economy and still you ask for more data and more experiments. It is like climate denialism. Enough, already. Keynesian economics has passed numerous experimental tests. Time to accept it and move on.

Charlie worries about markets in dark things. Me, I worry about (to misquote myself) an economy like a climate system, with arbitrary and unpredictable weather, vast storms, freezes, burns, droughts. This isn't a maybe thing; we know that without fiscal and monetary policy that is what we will get. And the very wealthy can work that system in their favor, so that only they will be able to save. And that is one possible future, and it ends with our civilization drowned.

Seriously, libertarians, wtf?

404:

I think it may be a form of dyslexia, or selective short term memory loss, since they're quite capable of restating arguments that were "asked and answered" upthread?

405:

Not sure whether you are being intentionally ironic, but in addition to calculus and physics, Sir Isaac Newton was quite the devotee of alchemy, the pseudo-science that proposed transmuting dross into gold..

Newton would be one of the most dodgy figures on any subject having to do with monetarism or currency.

406:

You seem to have missed the fact that he spent about the last thirty years of his life as master of the mint. Read Thomas Levenson's "Newton and the Counterfeiter."

Levenson packs into 165 pages a story it takes Neal Stephenson 3000 pages of the baroque cycle to tell.

407:

No, we live in a world where the apparatus purportedly created by governments for regulation of trading has been subverted by large banking and trading corporations so as to socialize their business risk and privatize their business rewards. This is regulatory capture on a scale unimagined by the economists who first warned of it. In other words, corporatism, where regulations are written to protect and eliminate risk for the large, politically well-connected institutions.

21st century corporatism is about as far from a libertarian economic system as a pure communist state control of the economy.

Corporatism is a failure condition of governments powerful enough to enforce Keynesian style economic controls. If you have a state with the power to enact fiscal and monetary policy on a national (and sometimes international level), you have a state that will eventually fall victim to regulatory capture. To prevent this, the typical approach is to make a state's regulatory regime more powerful and independent. But by doing that, it just becomes a more tempting target for regulatory capture.

The libertarian solution is to accept that the "arbitrary and unpredictable weather" of a free market economy, as a least worst alternative to government control or corporate control.

Would a libertarian solution work in practice any better than what we have now? I'm not sure. I am not so blind to history as not to see the problems with a totally unregulated market. However, I am sure that a strong libertarian representation in government would serve as a balance worst aspects of government control and/or corporate control of the economy.

408:

Levenson packs into 165 pages a story it takes Neal Stephenson 3000 pages to tell
What was that about turning dross (well ok wood pulp) into gold again?

409:

Short history lesson for you.
Greenspan became head of the Federal Reserve.
He then, with the connivance of Billy Bob Clinton, dismantled the Yousay's Banking Control regulations, in particular repealing the Glass-Steagall Act of 1933.
Piling Ossa on Pelion, Greedy Gordon Brown did similarly with the UK's, saying "It will be alright; the banks know what they're doing."
The banks then turned secured debt into an "investment vehicle" and started trading it in, to the extent that some people were obtaining 130% mortgages based on their own unsubstantiated declarations of salary.
10 years later, the resultant property bubble burst, and we're now living with the consequences.

Whilst it involved stocks and shares, something similar happened in the 1920s, culminating in the Wall Street Crash in 1929, and the passing of Glass-Steagall.

TL;DR version - Libertarianism has been tried in banking regulation at least twice and failed spectacularly both times.

410:

Brett @ 387 & others
The particuolar fungicide I'm thinking of ... unsafe to eat or drink, not a good idea to spray on your face .... otherwise OK.
But STILL not allowed to use it.
As for other dangerous substances... someone mentioned explosives ..
err ..
My late father was drafted to be a civil servant in 1941 - he was sent to the biggest explosives factory (at the time) in Europe - Ardeer.
What he didn't know about making things go *bang* ( & just as important, making sure they DIDN'T go *bang* when not wanted to ) wasn't worth knowing.
The fake "H&S" so-called "arguments" are just that ... fake. They are just more agrobusiness attempts to control the enrire market & make sure we have no choice.
Look, of the vartietis of just POTATO ( Never mind Tomato, or capsicum or raspberry or .... ) that I eat, only two are available on the open market, & then at inflated prices. The rest are "allotment-only" or "private sale-only" types.
They taste wonderful, but are not ahem "commercially" viable.
What the EU & the corporations are trying to do, is remove that option from our plates, & palates, so they can force their overpriced, untasty, mass-produced muck down out throats.
Now, I'm an unabashed omivore, but, ONE: I still like my veg... & TWO: imagine you are a vegetarian, & this narrowing of your options is forced on you? For corporations' gain & profit, & for no other reason?

411:

fridgepunk
THANK YOU
It's a classic case of regulatory capture & follow-up enforcement, for the detriment of the many to the enrichment of the few.
( Said he, re-donning his ancient Shop Steward's hat)
Yes, me - let me tell you that there is nothing that a UK employer dislikes more than an active Trade Unionist or shop-steward who is NOT a mamber of the Labour ( or further-to-the-left-politically) party.
It crosses their wires. Having, say, a shop steward who demands the workers' legitimate capitalist (Their labour is their capital) rights ... gets them all in a tizzy. let me tell you.
Been there, done that, got the T-shirt & the pay-off, too!

412:

Err, Greg, I guess you're speaking about Bordeaux mixture again:

http://en.wikipedia.org/wiki/Bordeaux_mixture

Personally, I don't think heavy metals such a good way of dealing with mildew and like. Though I guess quite a few "organic farming" types might disagree, err. But then, this are usually the same guys eschewing "toxic" medications and using plutonium in homeopathy. And of course it could be worse:

http://en.wikipedia.org/wiki/Copper(II)_arsenate

Still, I prefer my fungicides really "organic". Like in "carbon compound" organic. Though then again, I prefer them somewhat safer then this stuff:

http://en.wikipedia.org/wiki/Rotenone

Money quotes:
"Rotenone is sold as an organic pesticide dust for gardens."

"In 2000, injecting rotenone into rats was reported to cause the development of symptoms similar to those of Parkinson's disease (PD)."

Which BTW just shows both the legislation and its execution relating to chemicals is broken on so many levels when you remember the fun you had when buying some formaldehyde for tissue preservation. Though I guess compared to scientific illiteracy, the EU has little to do with it...

413:

Err, glyphosate is no phosphate ester, and it is not an organophoshate insecticide. It's a herbicide, and there is some phosphorous in it, still, I don't see how this is going to alkylate any esterases easily.

As for your idea about modifying insecticides into CW agents, quite a few of the organophosphates substitute the double-bound oxygen of the phosphate for sulfur, with insects oxidising them back again to the more toxic form and humans doing so to a lesser degree.

So you might have some fun with some malathion, some peroxide and some catalysator. Though then, Aum Shinrikyo showed even full-fledged CW agents like Sarin are tricky to use.

414:

Like most sensible folks, I'm in general agreement with Charlie's sentiments here. To wit, the point that Bruce Sterling made long ago to the effect that most of the supposedly wonderful glibertarian anarcho-syndicalist anonymity tech developments tend to wind up getting used by wealthy elites to subvert civil society.

Sci fi geeks tend to fantasize about creating glibertarian stateless paradises with these kinds of fantasy technologies (back in the day it was public key crypto, or Temporary Autonomous Zones, or Sealand stateless platforms; nowadays it's bittorent's recent serverless chat using public keys at usernames, or Bitcoin). But the glibertarian stateless paradises never seem to materialize. Unless you count Somalia (which no sane person does). What we get instead is the most tech-savvy wealthiest nation-states and the richest global elites using these new form of privacy tech to launch malware attacks (think Stutznet) and spy on everyone (latest NSA revelation claims the NSA even has the ability to alter amounts in foreign bank accounts, presumably by hacking) and most of all to hide money from the taxman (viz., the 2008 leak from that Swiss bank employee Herve Falciani).

That said, Charlie tosses out a lot of false flags here.

[1] Charlie claims

Bitcoin's utter lack of regulation permits really hideous markets to emerge, in commodities like assassination (and drugs and child pornography).

Sorry, that's a completely bogus scare tactic. There are already really hideous markets in assassination and drugs and child pornography. Sometimes in all three at once. Apparently if you head to certain markets in Pakistan and Afghanistan, you can use unrefined opium to buy child sex slaves and get someone killed. Meanwhile, Barack Obama spends each morning deciding which 17-year old girls to murder by drone without a trial or charges, according to this article. Between tor and VPNs and encrypted hard drives, kiddy porn is now a global commodity, unless you hadn't paid attention to the massive amount of underage kiddy porn allegedly being produced in Russia and the former Soviet republics. See "The creepy world of model scouts" in Jezebel online, 9 March 2012, or "The "Natasha" Trade - The Transnational Shadow Market of Trafficking in Women," Donna Hughes, Journal of International Affairs, 2000. As for drug trafficking, it's worth noting that poppy cultivation has risen by 1500% in Afghanistan since the American occupation. So the big trigger for drug cultivation here is not Bitcoin but American warmongering.

Kiddy porn and the drug trade and the assassination market and white slavery are all bad things, but there are plenty of ways to pay for these things anonymously right now. Conflict diamonds, gold bullion, krugerrands, U.S. dollars in cash, you name it. Bitcoin seems like a very small drop in a very large bucket.

To put it bluntly, if people like the American contractors who paid for 12-year-old sex slaves in Afghanistan want to do that sort of thing, they're going to be able to do it just as easily with cash U.S. dollars as with Bitcoins. So tossing out scare stories about Bitcoin getting used for drugs or human trafficking are just a red herring. That's a kissing cousin of the old saw that "we must re-engineer the internet to eliminate anonymity because it can be used by pervs to lure teenage girls to meet them." Anything can be used for bad purposes. Should we ban duct tape because serial killers can use it to tie up victims? Should be stop manufacturing shovels because mafiosi can use 'em to dig graves for their hit victims in the Nevada desert? The point here is that many American policies contribute much more to scourges like sex trafficking or the international drug trade than Bitcoin -- specifically, U.S. global military adventurism.

Claims by uninformed commenters that 'cash is not as untraceable as Bitcoins' are simply ignorant. You can use cash to buy conflict diamonds or gold bars or you can simply launder your U.S. dollars or Euros through a non-profit foundation which conveniently enough builds hospitals for the poor in the Cayman Islands. The hospital, however, never seems to get built...but your donation does show up under another name in a Cayman Islands bank, where you can extract it untraceably in any form you wish, or wire to it any point in the world in any form, including bearer bonds. Which once agains are untraceable. Silly ignorant people on this forum yammer on about "how could you carry 20 billion in dollars across borders" whilst ignoring the very real fact that people can and have been carrying billions in bearer bonds across these selfsame borders for many decades. You can fit ten billion in bearer bonds inside a manila folder with room left over for one of Charlie's books. If you doubt this, check out The Guardian article "How a big US bank laundered billions from Mexico's murderous drug gangs," 2 April 2011.

[2] Charlie goes on to shriek: "Bitcoin is pretty much designed for tax evasion." Once again, a total red herring. Earth to Charlie: come in Charlie...the entire international banking system as it currently exists is pretty much designed for tax evasion. The entire Cayman Islands government maintains itself in the black by serving as a scheme for tax evasion for arms merchants, drug kingpins, human traffickers, and who-knows-what-else. So by screaming about Bitcoin, Charlie is locking the barn door loooooooooooong after the horse has left. If you're serious about getting rid of tax evasion worldwide, Charles (and I think that's a good idea) your big objective should be to entirely re-engineer our current opaque corrupt grotesquely unfair global financial system, and we should rewrite global laws on charities and non-profits too while we're at it. Bitcoin is so far down on the list of mechanisms for money laundering that it's not visible without a microscope.

[3] The claim "Bitcoin is inherently deflationary" is a complete falsehood as far as the general market is concerned. Bitcoin is designed to rise in value relative to other currencies, but that's an entirely different issue from economy-wide deflation. Here, Charles reveals that he simply doesn't grasp the economic meaning of inflation or deflation. Inflation or deflation become problematic only when they affect an entire nation. But the rise or drop of one currency relative to another represents no meaningful problem at all, economically speaking, as long as the rate of inflation or deflation don't hit an exponential curve. If the U.S. economy switched to Bitcoin tomorrow, deflation would indeed become a severe problem. But deflation in the convertible value of Bitcoins is a non-issue, because if Bitcoin rises to (say) 1 million dollars per Bitcoin this will simply cause people to buy one millionth of a Bitcoin per dollar instead of one thousandth of a Bitcoin as today.

Can Charlie provide me an economic model that shows some damage to the U.S. economy or any other economy because Bitcoin rises in value relative to the U.S. dollar?

In order to do this, Charlie would have to show us e.g. that when the British pound sterling rises in relation to the U.S. dollar that this somehow hurts the U.S. economy. That's nonsense, and basic Econ 101 tells us why. In a world of floating currencies these kinds of imbalances self-adjust by changing the balance of trade. Imports become less expensive and exports become more expensive, so it all works out.

Since the size of the Bitcoin economy is minuscule compared to the U.S. economy, the entire "problem" of deflation in Bitcoin relative to the U.S. dollar is a complete non-issue. If any when the size of the Bitcoin economy grows to some appreciable fraction of the U.S. economy, then we might have to worry. But right now the U.S. has a 15 trillion dollar GDP. How long before Bitcoin approaches that value? Don't hold your breath.

[4] Charlie's claims about "Gresham's law" with regard to Bitcoin are just ignorant. Clearly Charlie doesn't know what Gresham's law means. Gresham's law refers to currency debasement; it states that bad currency tends to drive out good currency -- but this only applies to minted currencies, not to fiat currencies printed by printing presses. The example Charlie gives of Bitcoin miners making money by mining Bitcoins has nothing to do with Gresham's Law because the Bitcoins produced by mining are every bit as legitimate and as fungible as any other Bitcoin. Gresham's Law would only apply if we were talking about counterfeiting Bitcoins technologically -- but as far as I know, Bitcoins are reasonably secure against counterfeiting, though probably 100% counterfeit-proof. No currency is completely counterfeit-proof, not even the U.S. currency. (Look at some articles about North Korea's spookily perfect counterfeit U.S. 100 dollar bills if you don't believe me.)

Bottom line on this post?

Usually Charlie is pretty close to the mark, but this post is a combination of disingenuous scare tactics ("Think of the children!"), bogus numbers (the carbon footprint from hell is pure misdirection with a bunch of fabulation added in for good measure, as many others have remarked), red herrings based on crap economics ("Bitcoin is deflationary!" -- crazy American overseas interventions are far more likely to hurt the U.S. dollar than anything Bitcoin does) and pure flummery (the GINI coefficient of the Bitcoin economy is terrible -- yeah, Charlie, so is the GINI coefficient of the iPhone app economy. Gonna ban iPhones because of that? The GINI coefficient of tech entrepreneurs is horrible, what with their private jets and hundred-million-dollar mansions. Gonna shut down Silicon Valley for that reason?).

Once again, I certainly agree with Charlie's general gist here. We need to ban tax evasion, money laundering, and find ways of shutting down international drug trafficking and money laundering and sex trafficking. Bitcoin, though, is mostly a non-issue here.

Here are my suggestions (for what it's worth):

To ban sex trafficking, stop the U.S. from invading third world countries. Most of the underage girls getting sold into sex slavery are 'whores of war,' kids whose parents got killed. To shut down international sex trafficking, stop insanity like the 2003 Iraq invasion by the United States.

To shut down tax evasion, institute a VAT tax and treat capital gains as earned income for tax purposes. Also, ban all private banks from refusing to disclose their depositors' accounts.

If we're seriously worried about carbon footprints...people: cap and trade! Sign the goddamn Kyoto Treaty! And for cripes sake stop all these foreign wars. The U.S. military is the real "carbon footprint from hell."

If you're concerned about GINI coefficients, let's enact some serious financial reforms -- starting with putting the corrupt Wall Street criminals in prison. We haven't even restored the goddamn Glass-Steagall laws from 1932 or put a federal usury limit on interest rates America. (Ronald Reagan eliminated the usury cap in 1982 when American interest rates spiked above 20%. And now predatory loan storefronts can legally charge 50% per month in many states.)

If you're worried about Gresham's Law, stop running up insane American deficits due to our out-of-control military spending. America currently pisses away more than a trillion dollars a year on its worthless useless bloated corrupt military, and the Pentagon has never successfully passed an audit.

415:

Greenspan became head of the Federal Reserve.
He then, with the connivance of Billy Bob Clinton, dismantled ...
10 years later, the resultant property bubble burst, and we're now living with the consequences.

Greenspan has since recanted of some of his beliefs.

But not all. :(

416:

I think selling miners is a very good way to max profits in the whole BitCoin scheme. It is the Next Gen that is (always) worth the most. The next BitCoin is by design much easy to find than BitCoin+1. So you want to be the fastest to the next coin. The Next Gen miners are by definition, the fastest way to the next coin. It works like this.

1) Develop the Next Gen miner
2) Use it to find the next BitCoin ( and +1, +2...) and at the same time, start on Next Gen+1 miner.
3) Once Next Gen+1 is ready, start selling models of the current Next Gen miner to the general public while using Next Gen+1 to find BitCoins.

Wash, rinse, repeat.

I would not be surprised if the people who own the cutting edge on miners are not the same people who started this whole thing. It is actually quite brilliant, money from nothing and all that.

417:

But, being against the antics of the NSA & friends does not mean that you want no food safety controls ...

Why not? If the NSA can act against your interests, then why couldn't the department of food safety? If you found out that McDonalds was buying them off, susceptible to the same sort of corruption and lack of accountability that has plagued the NSA, what government program would you go run behind?

The problem is that the government is so huge, you would have no idea that the same antics were happening in other agencies. Sure there's oversight, but congressmen are only thinking about their constituents and their pocket books. They voted for a health care law with so many loopholes and special interest carve-outs that it's a no-brainer why it's negatively affecting so many Americans.

Although it might sound like utter nonsense to you, without food safety agencies, you would still be able to buy fresh eggs and and be able properly bake your chicken. Food-poisoning patrons doesn't make the best business plan. And no libertarian wouldn't support using the legal system to throw the book at reckless businesses. Society already has plenty of checks and balances outside of a power-hungry central government. They don't need *more* control over every facet of our lives.

418:

@414

Why do you feel the need to deflect to "Obama is just as bad" and make false claims about Bitcoin's tendency to deflation? Then why in the next breath do you claim that Bitcoin's deflation is no problem? Why do you gloss over the only non-deflationary scenario of BC, where its price crashes? You might want to read the macro section of an Econ 103 textbook to refresh yourself. If you can't borrow or tax using a currency, it's not going to complete the loop and will never be anything more than a very volatile asset used to launder value generated in the real economy and divert substantial funds to the pump-dump criminal cabal who run the market.

Charlie was applying Gresham's law to power consumption and you completely missed his point, which I grant was somewhat analogous and easy to miss for someone who hasn't studied econ very much outside a BC chatroom. Chalk one up for your own ignorance. Applying Gresham's law as specifically intended would mean that fiat currency will always drive out deflationary and volatile craptocurrencies without suffering the disadvantage of questionable asset certificates, so there's that. As I stated in my own comment above, BC is no threat to national currencies. The only way something like it might work is if we all become centrally-planned zombies who don't really need currency, banks, or financing. Good luck with that.

419:

The government bailed out the banks for their bad business decisions with public money. If you think that is somehow part of a libertarian economic model, you are misinformed. That's pure corporatism--socialization of risk and privatization of profit.

420:

I don't think you're making bad points, but I'm wondering if we've been reading the same comment thread.

Bitcoin does make a difference for certain criminal activities. It's a tradeable token, just like cash, or a bearer bond. All can be traced: there is a serial number or equivalent. But Bitcoin allows you to hand over the tokens without physical risk. If you go to a street-corner to buy drugs with cash, or to pick up a prostitute, you are in a high-risk situation.

Similarly if you have to go to the right market in Afghanistan with a wad of cash.

But for something that can be sent in the mail, a virtual payment method such as Bitcoin changes the whole balance of risk.

But, while cash has that pesky serial number, it only comes to the attention of the authorities when it passes through a bank, that transition from a physical token to the virtual world. You might be able to infer that a banknote going into a bank is drug money, and you might know who took that banknote out onto the street, but you don't know what happened on the street.

On the other hand, the way that Bitcoin works, you have a record of those transactions, even if you can't be sure of the parties or the context.

And there is a certain sort of paedophile crime which depends on the internet, even if the lawyers sometimes obscure that. (British Law has come to class downloading a paedophile image as making that image, a crime defined in the days of photography. It allows seizure of the hardware used.) Bitcoin is a way of paying for those downloads, which funds the creation of new images. But, unlike photography, there's no original image. You cannot destroy the negative because, discounting image resolution and compression, digital images are equally original. How many of the images circulated this year, detected, and counted by the Police, were created this year? I am not sure if anyone has reliable data, but the statistics might show if Bitcoin has had an effect. Has the rate of new image creation changed?

Personally, I am beginning to wonder if Bitcoin is backed by somebody such as the NSA. Another agency sponsored TOR to provide a secure over-the-internet channel for their spies to use. A crypto-based money system is surely useful too.

421:

Trottelreiner:
NONE OF THE ABOVE.
And I certainly wouldn't go anywhere near "Rotenone", thank you, very much. Nasty stuff.
Fortunately, the one I'm thinking of is (just) still available (no questions asked) by mail-order & I've stocke up - as have a lot of other people, so FUCK the Eu & their stupid laws.
Just hope no sneak informs on us & gets us £500 fines & jail.
Yes, it's that bad - not just regulatory capture, but perverse criminalisation of private persons for commercial gain.
You will note, that I'm carefully not naming the substance?

TYhe attempted prohibition of small seed-ditributors & private exchanges (!) is more of the same old.

422:

I was thinking of chalk in bread, or non-safe oils in butter & margarine & other known scams.
Or filthy kitchens, hidden from the public, with roaches, mice & rats .....
These are why you need food safety laws ....

423:

Oh dearie me...
Some twat from "Demos" has written in the torygraph on the inevitabilty of Bitconn, sorry Bitcoin.

424:
You will note, that I'm carefully not naming the substance?

I am, though problem is this means I don't know the actual compound and can't compare the risks involved. And having some aging experience with laboratory-fu, I know different people judge risks by specific substances quite differentially. And might label things somewhat different, too, lately, we looked up the ingredients of some sausages, one source said it contained sodium nitrite, the actual list didn't say anything about conservants, but mentioned "mineral".

So please excuse me if I'm not that convinced till I know the substance in question.

425:

(3) Are you seriously claiming, despite the discussion in some 420 (at time of writing) other comments, that changes in the value of currency_1 wrt currency_2 are not at least potentially problematic for all holders of one or both currencies?

426:

Pretty much all food safety law stems from a Scottish case (name eludes me right now) where a woman sued successfully over finding a dead insect in a bottle of soda. And you're still arguing against food safety laws?

427:

<whoosh>
The government bailed out the banks for their bad business decisions with public money. If you think that is somehow part of a libertarian economic model, you are misinformed. That's pure corporatism--socialization of risk and privatization of profit.

That folks, was my point about trusting banks to operate sensibly under a Libertarian regulatory regime going over Mr Henderson's head.

428:

I'd trust Greg on this one. We both have blood relatives who worked for Nobel Explosives, and when messing up means "removal of fingers" if you're lucky and "removal of life from you and everyone else in the building" if you make a big mistake, you tend to very careful with and respectful of every chemical.

429:

He was also quite the devotee of hanging, drawing, and quartering as a punishment for counterfeiters during his decades running the Royal Mint, during which period he reissued and stabilized the currency ...

430:

Oh yes, there's still some scare stories floating around about Sodium Nitrite.

Sodium Nitrate (NaNO3) and Sodium Nitrite (NaNO2) are both curing agents, used in products such as bacon and sausages. And both are found naturally in vegetables. Nitrates in general are also used in fertilisers. The Nitrite is a permitted food additive in the EU (E250) at low levels, as is Potassium Nitrite (E249), while Sodium Nitrate is E251.

So I can see why a food manufacturer might use a less obvious name on a label, but they really should be using the E250 number.

431:

Err, I tend to trust Greg, though please remember argumentum ab auctoritate is always somewhat problematic.

Thing is, chemical safety is a tricky issue. And let's remember that quite a few substances show their blessings only after several years; cue to the chemists of old washing their hands with benzene. Or the caution most biochemists show when handling ethidium bromide, which might be prudent or maybe paranoia:

http://www.labnews.co.uk/features/a-toxic-death-for-ethidium-bromide/

On the pesticide front, I still haven't made up my mind about glyphosate, where some beekeepers say it's very toxic to bees and official documents say the tensid used are more toxic then the stuff itself. Add to this beekepers have a vested interest of prohibiting GMOs if they want to sell their honey as "organic" and like, so while I don't necessarily trust $BIGINDUSTRY, I don't trust the other side either. Exempla ad nauseam abound.

432:

Banks are both wielding enormous power, and crucial to the working on the contemporary economy. The Libertarian ideology, as I see it, consists in saying that bankers should be allowed to have as much fun as possible, but that banks should not be bailed out in case of problem because that is how economy works.

That is akin to saying that the pilot of an A380 should be trusted to perform loopings if he develops the fantasy to do so, but that onboard computers should not intervene to prevent a tailspin because, hey, physics!


433:

without food safety agencies, you would still be able to buy fresh eggs and and be able properly bake your chicken. Food-poisoning patrons doesn't make the best business plan.

Which is patent rubbish, as witness the salmonella in eggs epidemic in the 1980s (anyone else remember why Edwina Curry was forced out of office in 1988? (The only Tory minister to be hounded out of her post for telling the truth, as far as I can recall.)

434:

AFAIK nitrites are implicated in the production of nitrosamines, which are not that high on my menu.

Also AFAIK, they are quite good at keeping Clostridium botulinum at bay. Appreciating functioning muscle contraction in most tissues, breathing apparatus included, I care more for this than any later cancer...

As for not using the E numbers, even without the "all natural" sticker I might have guessed why they were not mentioned...

http://pipeline.corante.com/archives/2013/06/21/eight_toxic_foods_a_little_chemical_education.php

If you excuse me, I have somewhat gotten over headdesking for daily examples of chemophobia...

435:

It seems moderately clear to me that any working Libertarian system is dependent on a sane, educated, population, which doesn't fall for the sort of inane claims I have seen in this thread. If personal choice is essential, it had better be based on good evidence.

I wonder what the combination of Libertarianism and religion would come out like. Religions vary enormously, and some sub-sects in a Libertarian milieu would be free to evolve into unpleasant swivel-eyed lunacy. The worst excesses of religion are blatantly incompatible with Libertarian ideals, but which would win the meme-clash. If you allow, or require, intervention to protect others from harm, might not worshiping the wrong God be harmful?

Most religions have a mix of laudable ideals with scary dangerous thinking. And Libertarianism seems to me to be short on mechanisms to cope with that.

436:

It seems moderately clear to me that any working Libertarian system is dependent on a sane, educated, population, which doesn't fall for the sort of inane claims I have seen in this thread. ... I wonder what the combination of Libertarianism and religion would come out like.

Hypothesis: consider the way the roots of the Scottish Enlightenment lay in a very odd theocracy -- protestant extremists who believed in burning witches and hanging atheists for heresy on the one hand but wanted to achieve 100% literacy (in the 17th century!) on the other, so that the people could read the bible for themselves. The results, a little way down the line, was the birth of the modern, insofar as the modern is a complex of memes that agree on the desirability of improving the human condition, learning more about our universe, and ultimately making things better. The theological justification for this was the idea of building the kingdom of god on Earth; but it gave us stuff like Adam Smith and Hume and a ridiculously large scientific/engineering renaissance (for such a small, poor country).

Now. If you start with a small, relatively homogeneous, highly literate and well-educated population, could you make libertarianism work? I suspect the answer is possibly -- as long as they agreed to cooperate on the essential prerequisites: namely, the need for equality of opportunity, provided by giving everyone a good general education for free. (Which would not necessarily resemble any current schooling model, given that schooling is more about enforced obedience training to indoctrinate the next generation of industrial serfs, with an elite status version to train the next generation of owners.)

Given a sane, educated population trained to think for themselves and act independently, then yes, I suspect a libertarian model might work.

The only fly in the ointment is that the societies I can think of who come closest to meeting those initial requirements tend to go in almost exactly the opposite direction. (Examples I'm thinking of: Iceland, Norway, the Netherlands ...) I wonder why? Heh.

437:

Now. If you start with a small, relatively homogeneous, highly literate and well-educated population, could you make libertarianism work? I suspect the answer is possibly -- as long as they agreed to cooperate on the essential prerequisites: namely, the need for equality of opportunity, provided by giving everyone a good general education for free.

<Libertarian>OHNOEZ; U iz steeling UR munneyz 2 edumicate teh dedbeetz!!</end>

438:

Donohue v Stevenson, it was a decomposing snail in a bottle of Ginger Beer.

439:

A big hunk of the reason libertarianism is infested with the Bad Crazy among Americans seems to me to arise because of the USA's original sin -- slavery. It left a toxic legacy of inequality and racism, which, along with protestant variant doctrines such as the prosperity gospel, convinced a large proportion of the non-African-American population are convinced that poor people are poor because they're wicked and evil and deserve to be poor, not because they've been systematically shat upon.

Thanks to the role of epigenetic modulation in utero it takes generations to fix the inherited component of the consequences of systematic abuse. Not to mention the cultural/memetic consequences, both for the abused and the abusers. Desegregation and the end of Jim Crow were a necessary precondition for long-term healing to begin ... but it's a terribly long way from finished, and the ongoing "poor = undeserving" meme in US society makes deprivation a self-fulfilling prophecy (while salving the consciences of the unfairly privileged).

See also "perfectly spherical humans of uniform radius and density".

440:

Thanks; the name of the case had genuinely eluded me. It was well enough known that I was sure someone else could fill in the particulars from the outline.

441:

Cryptocurrencies are probably here to stay now. It is up to society to figure out ways to deal with them. I was about to purchase Stross's Neptune's Brood using bitcoin from a bookseller I found in Germany. After reading this blog post I will probably never purchase any Stross material again. That's just how individual choice works.

442:

You know that's a book about cryptocurrency, right?

443:

Many of your criticisms seem valid; but I wonder if there's a silver lining. The mere existence of cryptocurrencies (not necessarily Bitcoin, but others with fewer problems), giving people alternatives, might force governments to be less intrusive in what they do with their currencies and banking, just as the existence of free software forced Microsoft et al to clean up their act somewhat.

I make no claims to sociological or economic sophistication. Just a thought I wanted to throw out there. Sorry if someone's already brought it up, there are too many comments to read.

444:

Aye, heard about it on Reddit's /r/Bitcoin. I'll probably survive without it though. Plenty of software writing to do...

445:

Which would not necessarily resemble any current schooling model, given that schooling is more about enforced obedience training to indoctrinate the next generation of industrial serfs, with an elite status version to train the next generation of owners

Been around schools and teachers, lately? As a group, teachers are about the least-likely supporters of the above hypothesis... And certainly, it doesn't reflect either the aspirations or the reality of the current syllabus. Either in the schools you might class as elite, or those you might class as training serfs.

...The politest response I can think of is to ask why you put forward that assertion? I'm the son of a teacher, the friend of several, a parent with an interest in my childrens' education, and an experienced instructor who at one point after the telecom bubble burst, started the road to becoming a teacher.

446:

Charlie, TBH, it was not about crypto-currency. It was first about adventures in a space chapel, and then about adventures in a water world. Crypto-currency was in the background.

Also, you never explained how exactly slow money works. A "bitcoin" protocol was mentioned, but you don't need an interstellar colony to generate bitcoin.

447:

Been around schools and teachers, lately?

Nah, just having a 1970s flashback to my own school days ... which, I fear, were shared by one Michael Gove, albeit with fonder memories: I suspect he'd like to inflict them on the next generation in turn.

448:

It appears Charlie is big on original sin in relation to organization, just like bitcoin's libertarian ideology poisons the well for him, education's industrial revolution roots have some unavoidable cruft that cannot be easily removed.

Sure teachers NOW don't identify with this scenario, but it's implicit in the system.

Speaking for myself, I've just finished a EFL teaching course and I feel more skeptical of the classroom environment than I ever was (And I wasn't a big fan to being with)

The problem is, we don't properly understand learning, so we default to a hodgepodge of tricks that seem to make sense and at least provide measurable metrics.

I had a bit of an epiphany watching Boulet (Of bouletcorp.com fame, Charlie knows who he is) drawing an illustration
https://www.youtube.com/watch?v=zDBOVrGG3ug

Now there's no way an art teacher can teach you how to do THAT. The man is using no construction or sketching or perspective guidelines, he's just going straight to ink from his head to the paper. This is the visual art equivalent of total language fluency, and just like the art school teacher, we try to break down what is going on, add technical terms and build up a scaffolding to blindly guide our pupils towards magical "fluency", which is something that happens largely on it's own in some mysterious way in the brain, often despite our best efforts to get in the way.

We need to completely overhaul teaching and learning. A nice start would be by first figuring out what exactly it is.

449:

Sounds like you skimmed over the infodumps (and/or missed the references to Chaum and zero-knowledge proofs). I should probably have avoided the "bitcoin" word and stuck with "digicash" (Chaum's original circa-1990 idea), but went for familiar-to-the-public terminology when I was writing it in 2011-12. Sigh.

450:

Well, it sounds a fair bit like the less ept parts of mine.

451:

Sounds like you skimmed over the infodumps

I didn't, but infodumps are called infodumps for a reason. They are there for the author to feel better, not because they are important. The story is about a Hero searching for the Artifact while the Villain is searching for a Hero. The story is background-independent, in other words. :-)

(and/or missed the references to Chaum and zero-knowledge proofs)

Just did a search, and the word "chaum" does not appear in NB. "Knowledge" appears, but never with "zero" attached.

452:

The problem is, we don't properly understand learning, so we default to a hodgepodge of tricks that seem to make sense and at least provide measurable metrics.

I think learning is understood well enough in psychology and biosciences, that knowledge is just not applied to school models. Three hints:

In current school systems, do students learn because they are curious or because they are forced to? Given that humans are curious by nature, shouldn't curiosity be the main motivating factor in school? By contrast I've the impression that the first thing kids learn in school is to forget curiosity.

How much energy in schools is spent on controlling what students learn instead of supporting them in learning itself? Modern bioscience says that pressure doesn't aid learning.

Metrics for learning? Don't get me started! I'll just quote a saying: Pigs don't gain any weight by putting them on the scales every day.

453:

I may, or may not, have done so here at some time, but I have been known to refer to parts of certain other authors' works as "death by Powerpoint". This refers to an infodump, which is written in a style that implies that the character infodumping is making a presentation at a meeting.

454:

I am a little older than OGH, and have a similar feeling. What I recall of my teachers is that most of them seemed horribly old, and the world they had trained in was different.

More realistically, it may be the early years of education that matter most, that set the pattern, and the teachers I had in Primary School were around 40 years older than I was, maybe more. I wonder if their professional standards had been kept up to date. There's much more re-training these days.

The world is changing again. It always does, of course. Will the products of Gove's educational fetishes be able to adapt to change? Will they be able to keep learning? They will need to.

I am not a Libertarian of the sort OGH points at, more an Anarchist, and what I recall seemed to be the instillation of a culture of unthinking obedience. And this was a Grammar School, we were supposed to be the elite.

455:

Although it might sound like utter nonsense to you, without food safety agencies, you would still be able to buy fresh eggs and and be able properly bake your chicken. Food-poisoning patrons doesn't make the best business plan.

"Utter nonsense" is a polite way of describing what it seems like to me, yes.

I would really recommend learning a bit about the history of food, in either England or America. Food adulteration was rife in both during the 19th century, before both regulation and effective enforcement of the same curbed the worst excesses. Based on experience, we can't rely on self-policing by food sellers.

Some recommendations:

"Food in History" by Reah Tannahill Weaver
"The Poisoners Handbook" by Deborah Blum


456:

Sure, we've known the good routes to learning for millennia: a combination of tutoring (one on one teaching with a teacher and a student who get along) and free play and experimentation in mixed-age and mixed-skill groups, so that students can help each other learn.

Problem is, only the wealthy, the home-schooled and some grad students get this kind of education now. This is me speaking from a long time teaching in grad school.

The problem with education is that we're experimenting with methods that try to simultaneously maximize cost-savings and efficacy. These are mutually exclusive goals to a large degree. Some people thrive in this environment, some do not, but it's what we get when we're trying to optimize suboptimal systems.

457:

I would really recommend learning a bit about the history of food, in either England or America. Food adulteration was rife in both during the 19th century, before both regulation and effective enforcement of the same curbed the worst excesses. Based on experience, we can't rely on self-policing by food sellers.

Not even this year we couldn't, as I remarked in this cartoon. But for a scarifying look at the meat industry almost 100 years earlier, albeit in the US, I recommend Upton Sinclair's novel The Jungle.

By the way, an acquaintance of mine is a chef. He quite put me off my coffee yesterday when the talk turned to meat preparation, and he told me that most supermarket chicken is injected with pork fat. If so, why? Why does bread need more than salt, water, yeast, and flour? Why does mayonnaise need more than olive oil and egg? Etc. etc.

458:

Re Prisoners/Warders (Guards/Corrections Officers)

It is a Truism in the United States that the only difference between the Guards and the Inmates is the color of the Uniforms; Maybe the Guards are the ones that finished 8th Grade (Which seems to come with a High School Diploma in the US if they just show up long enough these days).

When I WORKED at a major (US State) correctional facility, there was a Guard who had a Brother in for Murder in another facility. And another (Guard) who was innumerate. He literally had trouble counting on his fingers.

Not really promising educator material.

But they have to make a living somehow, in default of a guaranteed income.

459:

Actually, the US quit circulating Gold in 1933; Another of those FDR "Betrayals" according to Right Wing Nuts. And they took the Silver out of the currency (coinage) in 1964.

All proper preparedness freaks have a couple of rolls of "Proper" pre 1964 silver Quarters/Dimes squirled away in their gun cabinets.

460:

Did someone mention alchemy?
At the time of Newton, alchemy was entirely mainstream; not everyone thought it worked, but many did, including famous chymists like Robert Boyle. This was a result of having inadequate theories of the formation of matter and metals.

Now to tie it back to the original post and many comments on here - a lot of people have inadequate ideas about how money is formed.

So basically saying Newton was mad because he practised alchemy is totally wrong, because you're ignoring the historical context.

461:

As far as the mayonnaise goes, the stuff you buy in the shops needs a few additions to stabilise the emulsion. Extra egg yolk (some of the proteins stabilise the emulsion), for one brand.

That sort of thing is also necessary to cope with variations in the natural products, so as to deliver a consistent input to the process. Baked bread needs careful use of different wheat varieties, including hard red wheat from North America with very high levels of protein. You can adjust timings when you cook in your own oven.

462:

But for a scarifying look at the meat industry almost 100 years earlier, albeit in the US, I recommend Upton Sinclair's novel The Jungle.

The thought just occurred that this can legitimately be described as a grim meathook past.

Also that something in the writing technique made me feel more empathy with the characters than with those in almost any piece of SF, even SF whose characters suffer more than Sinclair's.

463:

Not even this year we couldn't, as I remarked in this cartoon.
I'd suggest a mid-range Cotes du Rhone, or a low end Vacqueyras.

464:

K Foundation did not burn any money at all. They donated it to the government.
If they had been smarter they would have bought £1m of machine tools and destroyed them.

465:

Contemporary reports all said the money was physically burnt.

466:

Since money is just IOUs by the treasury, that's the same as donating. Kind of a burnt offering, so to say.

467:

Contemporary reports all said the money was physically burnt.

The article and photo seem to back that up (I haven't bothered to watch the video). I'm not personally familiar with the K Foundation, myself.

On the other hand, the Rolling Jubilee debt forgiveness scheme is approaching fifteen million US dollars of actually helping people, on what is obviously a shoestring operation. It's not clear if there's any way of efficiently scaling up this idea.

468:

If they had been smarter they would have bought £1m of machine tools and destroyed them.

For a million dollars you could buy enough weapons to cause billions dollars of damage, if you are ruthless enough.

469:

One car bomb at a state of the art wafer fab would be enough

470:

My view of all this?
"Cry 'Havoc!', and let slip the dogs of war"

471:

Actually, AFAIK there are quite a few people, myself included, who think it quite likely Newton was mad because of him practising alchemy. But as a causating agent. Mercury vapours are not that healthy, you know...

Which, BTW, is one of the areas where my laissez-faire attitude towards chemical experimentation and, err, recreational psychopharmacology interacts with common sense; methamphetamine is bad enough already compared to other stimulants, but if you use an amalgam[1] or other heavy metal to get a product fit for human consumption, you better be careful and do some workup. And as Randy put it in "My Name is Earl", "People who *make* meth shouldn't *do* meth. It's always the second batch that blows up." So some control seems necessary.

[1] Err, for details, google for "Synthetic Reductions in Clandestine Amphetamine
and Methamphetamine Laboratories - A Review". Meks for some background when discussing "Breaking Bad" at work...

472:

Well, if you want an easy synthesis go for MDMA

473:

For the pork fat in chickens, personal experience says fat enhances taste and helps with heat distribution. Actually, there seem to be some recipes around how to do it with different fats:

http://www.bbq-brethren.com/forum/showthread.php?t=120785

I guess you could also buy chickens without the fat, but

a) quite a few people unaware how to process chicken
b) quite a few people, somewhat intersecting with a), not having the time to do it

explains why you can get it already injected. Oh, and of course it might help with chickens somewhat too lean.

Thing is, you have to balance concern for food purity with avoiding chemophobia. Botulinum and aflatoxins are not that high on my menu, and mold might take only a few days to grow.

And compared to age-old methods like smoking,

http://en.wikipedia.org/wiki/Smoking_(cooking)#Health_risks

at least we know somewhat more specifically what these ingredients are. And then there is the trade off, avoiding cancer vs. no more jerky, a hard choice.

For the bread, it somewhat depends on the recipe and taste, and AFAIR leavening with yeast takes some time. Please note some of those leavening agents have been used for quite some time, so we might argue they are as traditional as, say, yeast.

474:

Actually, short version, if MDMA is so easy to make, why is it so rare on the market? Long version, AFAIK the synthetic methods in the literature for MDMA and methamphetamine somewhat overlap, plus the educts are somewhat more difficult to get by. I can think of quite a few uses for benzaldehyd, piperonal, not so much. Might explain why AFAIR most XTC pills contain no MDMA, and from an economic angle, I guess the market for pure stimulant amphetamines is somewhat bigger than the one for entactogens, which might siphon educts somewhat.

As for releasing agents in general, some time ago my neurologist proposed switching from MPh to amphetamine, let's just say I wasn't that thrilled...

BTW, guess next time I buy some formaldehyde as a fixating agent, I should really resist explaining what you COULD do with the stuff I buy...

475:

I think you don't have a good idea of just how large a state of the art wafer fab is. Look up the Samsung Austin fab on Google Earth. The facility is 2.3 million square feet.

A car bomb would break a lot of glass and damage some equipment. You would do more real damage to the fab if you used it to cut power. Though I suspect that there is one hell of a backup power system on site.

paws4thot