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Schadenfreude

"Magic the Gathering: Online Exchange" has magically gathered all your online bitcoins and exchanged them for ... something or other. More here. For once, do read the comments—it's hysterically funny, in a sad way, to watch the weeping and wailing and gnashing of teeth.

C'mon, folks. Mt. Gox was a trading card swap mart set up by an amateur coder and implemented in PHP! And you expected NSA-levels of trusted computing security, so you trusted your money to it? (Oops. Let's make that better than NSA levels of security.) I've written software that handled financial transactions for a dot-com startup—a payment service provider, now a subsidiary of Mastercard. Been there, got the scars. (Do not ask me about the time our main production server got hacked three months before we went public: I still have PTSD. (Intrusion detected within 15 minutes; hacker targeted by law enforcement and corporate lawyers within 24 hours: nevertheless.))

You can't do this shit on an amateur basis and not get burned. Handling money makes you a target: the more money, the bigger the bullseye: and you can't write secure software on the run or patch up a proof of concept to production quality on a shoestring budget. Datacash grew from a tiny seed (about 30 credit card transactions in our first three months) to something that was handling around 20,000 transactions per server per day when I left in early 2000, following 30% compound growth per month for an extended period; the early codebase was retired as rapidly as was feasible, the company had penetration testers, an in-house crypto specialist, and coding standards with test harnesses and QA well before it was handling 10% of MtGox's turnover ... and still shit happened. From what I've read, I'm not convinced that MtGox ever understood what financial security entails. But the fault isn't theirs alone. The real fault lies with Bitcoin itself.

A real currency with a fiscal policy and the backing of a state that could raise loans would be able to ride out this insult. It'd be extraordinarily painful, but it wouldn't devastate the currency in perpetuity. But Bitcoin doesn't have a fiscal policy: it wears a gimp suit and a ball gag, padlocked into permanent deflation and with the rate of issue of new "notes" governed by the law of algorithmic complexity.

Someone please take my bottomless bowl of popcorn? I've eaten so much I think I'm going to be sick.

181 Comments

1:

William Gibson's term "Dunning Kreugerands" was such an apt description (and deserves to become its own virtual currency)

2:

When I think of Bitcoin, the phrase "irrational Exuberance" comes to mind.

3:

HA HA HA HA HA HA HA HA. *breathes* HA HA HA HA HA HA

Cue the horde of angry libertarians defending their dream of a currency free of ebil government.

BTW Charlie, what's your take on goldbugs? They seem to share a similarity with bitcoin enthusiasts.

4:

Goldbugs are fruitcakes too, but at least they're a bit better grounded. (You could in principle increase the gold supply if you threw enough resources at mining/extraction -- only before this became viable you'd have experienced savage deflation.)

The real problem with Bitcoin and goldbuggery is that they're symptomatic of people who have mistaken a pointer for an underlying value -- they think money is intrinsically worth something, rather than merely being a pointer to a counter in a game which becomes more valuable the faster things change hands. Or something like that. (Economic prosperity scales as the velocity of money increases, so if money represents an underlying value it must be the economic equivalent of distance ... hmm, this is a really weird metaphor! I need to work on it some more.)

5:

I read Debt: The First 5000 years after (I think it was you) you mentioned it on twitter. It certainly altered my perceptions of currency.

6:

You're missing the world's greatest untapped gold reserve here, sir: the sea. A truly staggering amount of gold is locked up in sea water, albeit at very low concentrations; the trick is to get at it.

Biotech and genetic manipulation is about the only way you could do it; GM seaweed that cascade-concentrates gold in its tissues up to harvestable concentrations (which are then grazed upon by GM geese, and excreted via the oviducts...)?

7:

I prefer Dogecoin, because I like how stable the currency is, though the deflation against WOW is worrying.

8:

For schadenfreude, look at this thread: http://www.reddit.com/r/Bitcoin/comments/1yv26o/gox_horror_story_thread_how_much_did_you_lose/

There's people that lost thousands of bitcoins. That's millions of dollars.

9:

Bitcoiners are goldbugs for a resource without gold's inherent value as a metal (NASA need it for spacesuit visor covers, if nothing else), presumably because that's cheating.

10:

Full disclosure: I still own a few bitcoins and they are currently in MtGox. So maybe I don't own them anymore, who knows.
I've been following the story and its precursors closely for the last few months and every time I've seen a ton of FUD mixed with a few nuggets of real information. All I can say for sure now that after this, some people will be quite a lot richer and others will be poorer for at least the same amount. It's been extraordinarily entertaining and much like experiencing one of the Gibson/Stephenson classics from the inside, and I'm happy that I've always treated Bitcoins like fairy gold - only ever worth anything once you've exchanged them for something that won't go poof randomly.

I *should* have been a bit more paranoid with my coins though, because I wouldn't have to worry now.

11:

From here

http://www.forbes.com/sites/cameronkeng/2014/02/25/bitcoins-mt-gox-shuts-down-loses-409200000-dollars-recovery-steps-and-taking-your-tax-losses/

"Mt. Gox’s failure is not the end of Bitcoin. It is a single company failing in a large ecosystem. The other major pillars in the community such as Coinbase, Kraken, Bitstamp, BTC China, Blockchain.info and Circle have issued public statements reiterating my thoughts. Bitcoin has taken a stumble, but it is up to the community to determine whether this is a scrape they can recover from. But, it’s important to realize that all wounds heal given enough time."

Bitcoin. The new, revolutionary currency that is 100% backed by ... faith! :-)

13:

There's an overlap between bitcoiners and goldbugs in people who want a medium of exchange outside of government control as a matter of principle.

But there are other bitcoiners and goldbugs who are radically different from each other. Some bitcoiners hopped on because it is futuristic and high tech, they see it as the future of currency and want to get on board. In contrast, some goldbugs think fractional reserve banking is a dangerous new idea and want gold because it has been a medium of exchange since before the invention of money.

And then in both groups there are just the get-rich-quick-gits. But they show up any time there is something that could turn into a bubble, from tulips to beanie babies to houses.

14:

The revolutionary thing about bitcoin and other cryptocoins is that they found a way to create a currency that wasn't backed by either a state or a physical commodity.

15:

The problem is that they made it by having a currency that is not backed by anything.

No matter how interesting are the mathematical and cryptographical challenges that it overcame, that bit is kind of a killer for the idea of, you know, being an actual currency, aka medium of exchange and store of value.

16:

Bitcoin will falter in the short term, but the fundamentals are sound. It solves a number of problems better than the alternatives. And the problems MtGox experienced are not insurmountable. They are solved problems. Many naysayers have not acknowledged some of the most innovative aspects of bitcoin, such as its distributed ledger feature, which makes it possible to transfer value safely and semi-anonymously (when used properly) from one state jurisdiction to another, and its ability to allow transactions to be escrowed by a third party.

17:

Actually gold is quite useful as a corrosion inhibitor in electronic contacts, and as a contrast enhancer in electron microscopy (for when you don't fancy double-nasties like osmium tetroxide). It is also used to sputter-coat specimens for scanning electron microscopy, as most organic materials don't reflect electrons well enough to give a good view.

All of these uses, and indeed plated jewelry rely on one of the more useful aspects of gold: it is very, very malleable indeed so a little goes a very long way indeed.

As for the goldbugs, well I'm afraid I've got several bits of bad news for you. Whilst gold won't be synthesised any time soon, the price is almost entirely artificial. The total amount of money that all the world's gold is worth is a small fraction of the total amount of money sloshing around in the world's financial markets, to the extent that gold is a bit-player at best. Gold prices will only stay stable if the markets so choose, so do try not to bank on such a fickle thing as market whim.

That's not to say fiat currencies won't eventually inflate to silly levels; they will and it is inevitable that they do so. This is missing the point of a fiat currency entirely; fiat currencies throughout most of their lives are useful for moving value about from place to place. Fiat currencies aren't investments, and the fact that when left in one place a fiat currency does nothing very much is a feature, not a bug!

Oh, and Bitcoin IS a bug, because it is deflationary. Deflationary currencies encourage hoarding, which reduces the money available in the system and decreases investment in useful things; truly the demise of Bitcoin cannot come fast enough (although, possibly, if asked to choose between PHP and Bitcoin being first to the block, I'd chose the former).

18:

"There's people that lost thousands of bitcoins. That's millions of dollars."

No, it isn't. That's the point. They lost whatever they paid, not the maximum value that someone was notionally willing to pay for their bits yesterday or last week or whatever.

If anyone put in millions of dollars to buy Bitcoins, they were out that much the day they did it. They were just gambling that it was going to be salable in the future to some other schmuck.

19:

Meh. I don't care. If anyone ever asked my advice (not that they ever have), I would be saying "don't keep your cryptocoins at an exchange". In exactly the same way I would say "don't keep money with Paypal". Think how easy it would be to setup a nice looking website, take in people's bitcoins, and then disappear. Easy. Or even just have a gambling website. You're gambling that I'm actually honest and I'm going to pay out at the rate I say I am...

Ahem.

So, the lesson here is, if you take a decentralised resource (in this case Bitcoin) and you centralise it, you get problems. The same thing occurs with other centralised systems on the web (e.g. Geocities, Delicious, Posterous, and many many others).

There is nothing in Bitcoin that demands there be a centralised place to do anything.

Anyway, I doubt I'm going to convince anyone of anything. So I'll just exit stage left now.

(Disclaimer: I have ~70 bitcoins. In an offline wallet. I believe in the future of cryptocurrencies, and think that even if Bitcoin is not the future, something based on it might well be.)

20:

"We have elected to put our money and faith in a mathematical framework that is free of politics and human error." --- Tyler Winkelvoss.

No tears for the trust fund baby --- but the Reddit /r/bitcoin thread on war stories has some heartbreaking stuff, including at least one suicide already.

21:
Bitcoin will falter in the short term, but the fundamentals are sound
Oh, that's all right then.
22:

As someone about (I hope!) to jump headlong into a Bitcoin-based startup, I can say that I don't believe that Bitcoin has an inherent value; indeed I don't think that inherent value is a well-defined concept.

Rather I think that Bitcoin has use value, just like fiat currencies do. I find it hard to see how a theft from MtGox is going to damage its use value in perpetuity; in fact if you turn that claim into something falsifiable like "the theft of 750,000 BTC from MtGox will permanently prevent its use in <insert application here>" it seems just false.

Graeber's Debt makes the case that money as presently conceived was invented in the Axial Age as a way of funding war between states. It uses the mechanism of social obligations tied to debt to impute to money this mysterious "inherent value": if you owe someone state-backed currency, in some sense they own you as a person.

Bitcoin cleanly separates use value from inherent value; really it's addresses that own Bitcoin, not legal persons, so while the Law can impose social obligations related to Bitcoin transactions, the Bitcoin transaction system itself is entirely free of such obligations; thus any transaction with an anonymous party is similarly free.

If you take the world of money as it exists today and project it forwards, not to Graeber's small-c communist future of a resurgent human economy, but to the posthuman world of intelligent software agents and non-corporeal people, then the distinction between Bitcoin or other cryptocurrencies and state-backed currencies becomes very sharp. The distinction will be precisely this: when you enter into an agreement using a currency system, does that entail a potential change in ownership or control of your mind-state? If it does, it's the same wonderful stuff we've been using this last five millenia; if not, it's Bitcoin vN.0.

23:

"A real currency with a fiscal policy and the backing of a state that could raise loans would be able to ride out this insult. It'd be extraordinarily painful, but it wouldn't devastate the currency in perpetuity."

History is full of examples of states that mismanaged fiscal policy and whose currencies did _not_ recover from, leaving large swaths of note holders penniless.

24:

Yea, is like the "all wounds heal with time" crap.

Unless of course the wound is "I lost real money I was going to need and now I'm screwed" in which case, the "wound" to Bitcoin may heal, the one to your wallet is not.

25:

Charlie,

for being a science fiction enthusiast, you are such an incredible bore when it comes to Bitcoin. Here's a buch of extremely clever people trying to kill banks, the fed, credit card companies, etc etc etc, and all I hear is boo and hiss from you.

Mats

26:

Wow, if you have to be Charles Stross to be an "enthusiast", just how high is the SF bar set?!?!!

27:

There's one huge difference between a bitcoin con and a conventional con. If I scam you out of investment money, the money is still good, even after the scam is found out. Even if it's a Beanie Baby bubble, the cash I get out of it is still good even as the beanies themselves lose money after people come back to their senses.

Likewise, if I'm a consignment shop for expensive, small things like jewelry and I abscond with the property, I can still fence it on the black market. I might not get as much if I'm in a hurry but it still has value.

In running a bitcoin con, the faith in the currency is under attack. If I steal a million reichmarks in 1944, I'd better convert to some other currency quick or buy some hard assets before it goes in the toilet. By stealing bitcoins, I'm ruining belief in the valuation of the very thing. If I can't cash out, it's worthless.

The only comparable scam I can think of is with a religion. If people lose their faith, my power evaporates.

28:

Oh god, way to kill the dream.

I had always heard it wasn't even that MtGox was a place to trade Magic cards online, it was a place to trade MtG: Online cards. It just added this delicious layer on top of the beauty that was MtGox. But not even that is true? I'm crushed.

29:

History is full of people that jumped out of an airplane with a parachute and died anyway.

From that, one does not deduce that is safer to jump out of an airplane without a parachute.

30:

Charlie, I'm delighted to find out that you used to work on real-world grown-up financial transaction processing software. Me too! Mine was this one:

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

The one time I've been to the UK, it was to meet with Royal Bank of Scotland to try and figure out what it would take to build their transaction protocols (some APACS thing) into our product. (It proved to be very feasible, and doing so would have let us sell outside North America. But it was not meant to be, for non-technical reasons.)

(I'd open source parts of it, if I could get Red Hat to give me the rights to our source code back. Alas.)

31:

I wrote an APACS payment gateway -- simple protocol for web apps at one end, X.25 line to the British banks at the other. Then made it jump through compliance hoops for half a dozen different high street banks (credit cards are settled via the banks, operating as Visa/Mastercard franchises, in the UK, not direct via Visa/MC). Then I had to virtualize the terminals to handle resource contention so that big retailers could handle multiple payments concurrently -- the APACS specs were for a hard-wired card payment terminal in a shop, not an internet service. Then I had to integrate payments to multiple accounts in multiple currencies -- all concurrent, of course.

The open-sourceable fossilized bits can be found on CPAN to this day (as abandonware: anyone want to adopt an orphan Perl module or three?). Note: this stuff was designed to work behind a firewall and a proxy, i.e. in an environment where attacks could be filtered out before they hit it. Note the happy-fun preforked server mode for running pools of server processes in parallel ... this is about 5% of the codebase that I wrote and maintained, which in turn was about 30%-40% of DataCash's core functionality in the early (pre-2000) days. I am really glad I don't do this for a living any more; I was fixing for a fatal heart attack by age 40 due to stress if I'd carried on.

32:

My favorite crackpot theory so far is that Gox got coopted or sucked dry by the Yakuza and now we're seeing the results.

In fact there's a lot of space for crackpot theories where a company of one to two dozen people is sitting on half a billion euros, ocean's eleven style plots start looking lucrative here.

33:

What language did you write that financial transactions handling software in?

34:

Well, since you mentioned the NSA... maybe BitCoin was only the prelude to this recently announced 'contest':

Nature News highlights: 25 February 2014

Can YOUR algorithm predict a broken promise?
The INSTINCT Challenge offers $50,000 in prizes for the creation of innovative algorithms that use data from a recent set of studies to predict trustworthy behavior based on volunteers' neural, physiological, and behavioral signals. Learn more about the challenge at http://www.iarpa.gov

Caveat:

The T&C fine print reveals that only U.S. residents would get paid; non-residents are SOL. How's that for engendering trust...

35:

Yeup, it sounds like what you wrote is very similar to what I wrote, in terms of what it did, except mine was in (very portable) C, was modular in terms of protocol and comm channel support (serial, X.25, TCP/IP), and was sold as a product that our customers would use to build the sort of system you folk built from scratch.

So you used Perl? How did you get realtime performance out of it? The US protocols had all sorts of specifications about what would happen after so-and-so number of milliseconds, with pretty rigorous certification processes. Heh, I can still remember finding obscure bugs in Linux and Solaris serial port drivers...

(That's why my code ended up tight enough to port to PalmOS over a three day weekend just before a conference. I'd lug around a Palm 3 and an external modem connected with a DB25 cable, so potential customers could actually see that a small piece of software could dial the bank over a copper pair, just like a POS terminal, and actually move funds around.)

If you bought porn or e-books in North America in the late 1990s, your funds very possibly went through my code. (Remember "Peanut Press"? They were a customer. So was "Linux Mall", as it happens, one of our first.)

36:

Perl.

25,000 lines of object-oriented Perl, stringently documented and structured for maintainability. (I left in 2000; they retired the last of my code in 2008, so I'm told. Not bad for dotcom 1.0 era hackery, I think.)

37:

Well, that's not a huge surprise, on the whole. Be interesting to see what happens next.

With gold, as with diamonds, there are some really cool things you could do with the stuff if it wasn't kept artificially scarce and expensive. There's a lot more gold around than any of the rare earth metals, why the hell isn't anyone proposing them as currency metals? Answer, because the stupid mystique of gold overrides common sense...

38:

Charlie seems to be the only one posting here that understand that money is, by it's mature, worthless, and not only that it is worthless, it must be worthless to work.

It is, as he says, a pointer. "Value" exists only in minds and no thing has any intrinsic value of itself. If there are no sentient beings around to use it, nothing is "worth" anything. How much is a million tons of gold orbiting out in the Oort cloud worth? Unless someone can get there, nothing at all!

There are a whole host of things that follow from this simple understanding, and they aren't what any of the commentators have claimed here. The idea that a pure fiat currency inevitably leads to inflation is, I think, refuted simply enough by an objective examination of history.

A government sovereign in it's own fiat money can purchase anything for sale in that money. The Bank of England can pay off your entire "national debt" overnight by simply writing cheques, or more simply be altering figures in electronic spreadsheets, simply following the rules of double entry book keeping. I happen to think that would be quite a bad idea, but the fact remains that they could.

So far as money goes, we are like astronomers still insisting on the calculation of planetary orbits using circles and epicycles.

Every economist knows that money is inherently worthless, but they mostly never tell you that. Even Barack Obama has claimed that the U.S.A. can "run out of money" and gives every impression of believing it. But it is a lie. We can no more run out of money than we can run out of centimeters or parsecs. They aren't "things", they are units of measurement.

Sure a fiat currency run badly can cause trouble. A nation can't make more than it's available resources enable it to make, and creating too much money can lead to inflation. Yet the monetary base of the U.S.A. was basically trebled in a few years and where is the inflation? There is none to speak of because there are more things for sale than there is money to purchase them in the hands of those who would like to buy them.

The goldbugs and the "bitbugs" are wrong for the very same reasons. They think that money, the mere measure of wealth, must itself has an intrinsic value. But nothing has an intrinsic value.

I could go on but may I recommend you read some economists who actually understand how modern fiat currencies actually do work, and why they work? Many of them are part of a school called "Modern Money Theory" and can be found by a google search on that term.

39:

On rereading the thread it seems that my opening sentence was too harsh. A few of the other respondents seem to understand as well. My apologies if I offended anyone.

40:

I understand perfectly well that money is, as you say, "worthless". Regardless, I still think it's a good idea to move control of money from the state, to, well, everywhere. If we have to have money (and we can't live in a Culturesque post-scarcity society), then it is better (for the majority) for it to be out of the control of people who have a vested interested in manipulating it for their own benefit. Oh look, decentralised cryptocurrencies may well have that property! I don't think the money supply should be in the hands of banks, or governments.

Bitcoin is surely not perfect, but is better than the USD in many ways...

And even if you don't think it should be a currency, it is still a perfectly good transfer mechanism, much cheaper than Paypal, Western Union, or others.

(I have some thoughts about an ideal monetary system, but that's dreaming. And I'd rather dream about post-scarcity.)

41:

Speaking of MtGox and security, I forgot about this: http://i.imgur.com/xMeW43a.jpg

Well...we all have to start somewhere, right?

42:

My goodness; the MtGox collapse makes the Bitcoin wallet theft by botnet story completely trivial. Unless you have a Bitcoin wallet, I suppose.

43:

What I note in some of the comments in the second link you had, Charlie, was that some of the folks, and some of the other exchanges, are talking about setting up a real exchange, with accounting, and security, and... um, er, wasn't I reading that the idea of bitcoin was that you could transfer moeny without recourse to financial institutions?

Oh, and the pro-bitcoiner, who exited stage left? You *completely* blew your stage directions, you're supposed to exit stage right....

mark

44:

As currently conceived money is about greed. A banking license gives the banksters license to create money at will and lend it out to you at will creating a debt from you to the bank. This is the only way money (other than coins and notes which only make up 3% of our economy) is created. This is why debt is 500% odd of the value of the economy (goods and services we actually make).

As we see banks are incredibly greedy and have no interest whatsoever in creating the right amount of money. In the upswing of the business cycle banks go bonkers, lend out far far too much money and fuel unsustainable asset bubbles. The bubbles go too big until inequality grows too large and the minsky moment arrives. Them on the downswing of the cycle banks lend too little and recessions are exacerbated.

A new system of money is needed where money is created by agencies other than banks who are without doubt utterly in trustable with something as vital as the nations money supply.

I agree with Charlie that bit coin isn't it though. What we need is either a responsible government or an independent but accountable organisation to control the money supply. This agency should measure the money supply and limit money lent, raise taxes and decrease public spending when prices are rising too quickly. The opposite - lowering taxes, lending money and increasing public spending in a recession.

The current control - setting of policy interest rates- is utterly ineffective in dee recessions such as now. Even when set at zero the fall of asset prices on 2008 was so steep banks still won't lend. Households are also too poor to put up collateral for loans. We can also see that banks are very ineffective at allocating capital equitably.

Governments with their own central banks never run out of money. They are not resource constrained. They can be inflation constrained in that they wouldn't want to increase spending if the economy was running at full capacity with full employment. A situation we haven't been in for 30 years at least.

The economy is set up for the needs of bankers and the 1%. This must change. With wages falling, with 5 million people un and underemployed things must change. First off there is £374 billion (a third) of all outstanding government debt has been bought up by QE and resides in the wholly publicly owned Asset Pirchase Facility. This debt can be retired tomorrow with no adverse effect on the economy. The rest of the debt can be bought and retired immediately after this. The issue with the economy is never the government debt or deficit. It is always household and private sector debt levels.

The conservative government is utterly wrong headed to focus on government debt. It's motives are ideological rather than economics. The loose monetary policy and tight fiscal policy were and are the utterly wrong approach. House prices have risen too fast. Immediately after the election interest rates will be increased and the asset prices will fall again, growth will stop, banks will be insolvent again. We go into that cycle with 500% of GDP in total debts. There will be riots.

There is another way though - retire the government debts, reduce taxes, start massive programs of public spending on education, health, infrastructure. Introduce a citizens allowance.

This is all safe as as well as raising interest rates, if core inflation picks up and we reach full employment - signs the policies are working- the government can also insist that banks raise their contingent capital requirements. At the moment banks can lend out over thirty times the value of their assets. Raising this ratio so that banks can only lend out five or ten times as much will slow bank lending,ale banks safer and reduce inflation.

As said in previous comments Modern Monetary Theory is the only answer.

45:

No. I got my directions all correct thanks. I exited stage left, 'cause that's where all my compatriots and comrades are hanging out. (I'm not your typical anarcho-capitalist bitcoiner. I'm not any sort of capitalist at all...)

46:

You used the word "banksters" un-ironically.

You lost all credibility at that point, and I stopped reading. Which is a shame.

47:


They are banksters. There is no other word.

48:

That sounds like a deliberate challenge to the English language.

49:

Even banksters are subject to competition, and the banks are no exception. Large salaries for key staff aside, if you examine modern retail banks closely, you will find that they actually make only minimal percentages off the money they process, and are subject to horrendously strict regulation (quite often politically motivated and not actually very well thought out regulation at that).

Banks exist in the form that they do now because they are necessary to our society, and security and stability concerns force them to operate in this manner for safety's sake. The bank run on Northern Rock induced by a certain Gordon Brown's ill-judged meddling in a known-working regulatory system shows how easily this balance can be overturned; we meddle with banking at our peril.

Extremely rich people exist mostly by chance, and because our monkey brains cannot let us stop trying to climb ever higher up the social status ladder, despite our being near the top anyway. The 1% are not actually screwing us over, they are in fact just an abherrent tiny minority. Forget about them, they are not actually important to you and thinking about them is only ruining your mental stability.

Worry instead about politicians. They have far more scope to make life worse than any of the 1% demographic can, and moreover politicians are by nature meddling little bastards. Acting to limit the power of politicians is a far more laudable cause than is burbling on about bankers.

50:

Michael. Wrote:
I understand perfectly well that money is, as you say, "worthless". Regardless, I still think it's a good idea to move control of money from the state, to, well, everywhere. If we have to have money (and we can't live in a Culturesque post-scarcity society), then it is better (for the majority) for it to be out of the control of people who have a vested interested in manipulating it for their own benefit. Oh look, decentralised cryptocurrencies may well have that property! I don't think the money supply should be in the hands of banks, or governments.
Bitcoin is surely not perfect, but is better than the USD in many ways...
And even if you don't think it should be a currency, it is still a perfectly good transfer mechanism, much cheaper than Paypal, Western Union, or others.
(I have some thoughts about an ideal monetary system, but that's dreaming. And I'd rather dream about post-scarcity.)

Bitcoin fails to be a currency in the most fundamental way possible - It Is Not A Currency.

It's a valued speculated resource, which was programmed deflationarily. Both of those fundamentally make it unsuitable for use as a currency.

Charlie's comments above, about money / currencies being meant to and made to have high spending velocity, are exactly and precisely spot on. If you do not understand this you are self-identifying as unqualified to design or judge the value of possible currency / money systems.

This is fundamental, literally underlying fundamental economics. If you can't get money right you're going to get everything wrong.

This is not a criticism of the ideas of decentralizing currency, cryptocurrency, etc. those are complex but political / social / legal / programming / security. But ANY proposal has to fulfil the core need to work economicslly as a currency. Failure to do so is a crippling flaw.

51:

You already can create your own currency if you wish, independent of government and its bothersome regulations and deposit insurance and the like.

Currency as a measure of wealth is simply a form of IOU, promising something of value on demand by the person holding it. Write your own IOUs and hand them out then spend a few decades or centuries building up a level of "full faith and credit" by never ever failing to refund someone who presents such an IOU in a transaction and they will become a useful form of portable wealth tokens other people with accept. It's called "money".

Bitcoin only passes the sniff test as a currency because the people trading in it believe this form of digital IOU represents wealth. They have invested about four years of "full faith and credit" in this belief which was a good start, until... oops. Start again.

52:

There is no seperation between banker and politician. Bankers provide over 50% of the funding for the Conservative party. That is why the policies we have in place are in place they are to benefit the 1% not the 99%. Politicians produce policies for those who lobby or pay them.

As for profits of banks. HSBC paid 300 bankers over £1m this year. That is not a tight profit margin. They expect return on equity if 10-15% pa- this is three times the level of businesses in other sectors.

As for your story about 2008 being a conventional bank run on a retail bank. It's ridiculous. It has no bearing on the reality if the banking system. If 2008 was about conventional bank runs it wouldn't have collapsed the entire banking system across the while world.

2008 is a story of banks creating a massive set of asset bubbles across the whole world (to fund 15% return on equity and hundreds of million pound bonuses), lending out 50 times as much money as they had assets to cover, hiding the money from the tax man in hedge fund subsidiaries that they fully own but are registered in tax havens (the shadow banking system), parcelling up thespians as derivatives to further leverage the debt and then waiting for the bubble to pop and get the bail outs. This had nothing to do with Gordon brown - how could it? It effected the us, canada, Taiwan, Australia, theveu and the us.

Extremely rich people don't get there by chance. They get there by force of greed and antisocial psychopathy. You don't get a situation where 80 people own as much as 3,000,000,000 people by chance. You get it by corruption.

And I think it is bad for your mental health to ignore the realities of the world we live in. My place is in this world arguing to make it a better place. If you think you want to live in a corrupt dystopia as a serf to billionaires you will have what you deserve.

Banks have remained completely unreformed since 2008. This will happen again in a few years time and it will be worse as debt levels are higher. The current system of money creation is designed purely and simply to enrich the bankers who fund politicians. It has nothing to do with sound economics or rising living standards and efficient capital allocation. Any other system would be better.

53:

"I understand perfectly well that money is, as you say, "worthless". Regardless, I still think it's a good idea to move control of money from the state, to, well, everywhere."

For what reason? "Government is bad"?

Government controls all our other common systems of measurement. Inches and feet or centimeters and meters? Someone has to have the authority to decide. Deciding is control and control is government.

Yes, there's an international body that designed the international units of measurement (S.I.)but it was the Canadian the government said, some decades ago, "you have to use this system".

So my milk now comes in liters, not quarts. Would you like a store where half the milk was sold as quarts and half as liters?

Only governments have the power to levy taxes. And as a chartalist (mostly)I think that it is taxes that enforce the use of our common measure of wealth. The Canadian dollar largely gets it's "worth" from the fact that I have to pay taxes in Canada, and the government will only accept payment denoted in Canadian dollars.

So I have to get Canadian dollars, which means I have to do work that is paid either in those dollars or currency convertible them. So Canadian dollars are valuable to me and to everyone who has to pay taxes.

In the absence of some government why should I accept an I.O.U. from someone I don't even know as money? Can you tell me of any other organization that has the power to force me to pay taxes in dollars?

In Canada, as in most modern countries with pure fiat currencies,things the following (among other things) are true statements:

- The government does not spend out of tax dollars. It creates dollars by fiat and spends them.

- Tax money is destroyed upon receipt by the government.

- Every deficit run by the government is a credit to the consolidated private sector to the penny.

- The government's accounts plus the domestic private sectors accounts plus the external account must, as a matter of definition, add up to exactly zero. Any sector that runs a deficit adds credit to at least one other sector. The only time the domestic economy can run a government surplus while the private sector also runs a surplus is when people outside the country are buying more from the country than it is buying from them (in other words they are sending us money).

The general circumstance is that the government must run a deficit as long as the external balance of trade is negative. This year Canada's external balance is around a billions of dollars in deficit whilst the government is trying to balance the budget. The only place the money can come from is the domestic private sector. That can only make the domestic economy worse, either by increasing unemployment or starting a deflation. Deflation is much worse than inflation.

As an aside, I am sure that Charlie will understand that if Scotland votes to leave Great Britain it will have to create it's own currency. To continue using the pound under such circumstances will make Scotland just a theoretically independent thrall of the Bank of England.

54:

I understand perfectly well that money is, as you say, "worthless". Regardless, I still think it's a good idea to move control of money from the state, to, well, everywhere. If we have to have money (and we can't live in a Culturesque post-scarcity society), then it is better (for the majority) for it to be out of the control of people who have a vested interested in manipulating it for their own benefit


This seems like a typical libertarian answer of "the government is bad so lets deregulate!" If you're worried about the government not acting in a way that benefits the people then why not be an advocate for reforms that create more democratic practices and institutions?

Leaving it up to the market is a sure fire way to make sure that people don't have the power. Or at least the average person doesn't, the person who manages to get the most money (and thus rig the game in their favour) gets to decide.

55:

I am sure that Charlie will understand that if Scotland votes to leave Great Britain it will have to create it's own currency. To continue using the pound under such circumstances will make Scotland just a theoretically independent thrall of the Bank of England.

It's not enough for Charlie to understand that; the politicians who are setting up the new independent Scotland would have to understand it as well.

Unfortunately, the SNP's plan A seems to be to keep right on using the British Pound, even though the (rest of the UK) government themselves are making it plain that they think it won't work, and want no part of trying to make it work.

56:

But (pace): Bitcoin. The new, revolutionary currency that is 100% backed by ... faith! :-)

Errr... all currencies are backed by faith, including Au - see Charlie's comment shortly above.
Oops

57:

Well, I had 17 bitcoins in mtgox, which has a current notional value of around 5kpounds. Or I could just call them the 100 pounds I spent to get them.

I don't like this, my strategy was to have some bitcoins as insurance against the apocalypse (where bitcoins take over the world), but I've lost my insurance.

58:

Not faith, force. Your local tax-collecting authority can decide what it wants to be paid in, and whether that's gold, bitcoins, fiat currency or seashells, anyone engaging in taxable economic activity needs to get some. Guarantees demand for that product.

Currency, like justice, comes from the barrel of a gun.

59:

I'm reminded of something that Grant Morrison wrote in an issue of The Invisibles: "Money is a ghost, and it has made all of you its slaves."

60:

Goldbugs and bitcoin enthusiasts have a point. They don't want to trust government to manage the money supply, because politicians are often irresponsible.

They think it's better to inflate the money supply based on random events that are largely outside government's control, because they think government will do worse than random.

On average they are wrong. But it's possible for government to make such a horrendous mistake that it's far more important than average mistakes.

They have a valid concern, it's just they don't have a good solution to the problem.

Ideally we would get a system that automatically adjusted the money supply to meet our needs, without doing things we like in the short run that hurt us in the long run. It would be independent of politics. It would be independent of crackpot economic theories. I don't know how to do it.

Jamiepeterknights gave a good description of how things would go with unregulated banks. I don't know how much it's ever gone that way. Then he gave a possible description for how things might be today. I don't know whether he's right and I don't know how to find out.

It's possible that the US federal reserve actually controls the money supply independent of politics, acting as prudent economists independent of the banking industry's foibles. Maybe they control the banking community as much as it needs to be controlled. I don't know. I don't know how to find out.

Here's another story -- the USA runs a great big trade deficit and has to pay for it every year. Until around 2000 they paid for it with the dot.com bubble. Foreigners bought US stocks instead of US products. Then the bubble burst and their money was gone and they didn't want to do that again. So maybe the US government came up with a special plan to sell US houses to foreigners. It looked safe, and if you weren't sure you could buy insurance. So for another 7 years or so foreigners bought US houses at increasing prices, and the increasing value made it look like better deals, right? And then there was the housing bust and the foreigners' money was gone again. Was it because government failed to regulate bankers' greed or was it that the government did it on purpose? I don't know and I don't know how to find out.

But about the bitcoins -- if we were on a gold standard, and there were bankers who were banking gold coins, and a bank had bad security and got stolen from and then an audit showed that they didn't have anything like 100% reserves -- if something like that happened, would you conclude that it meant there was something wrong with gold coins?

If the same thing happened with paper dollar bills, would it mean there was something wrong with paper dollars?

How come the first time it happens with bitcoins people talk like it means bitcoins are bad? They might be bad but when somebody pulls exactly the same scam they pull with every other currency, how does that make bitcoins special?

61:

They're not trying to do anything other than kill the ability for a state to make them pay taxes, if there's any ideology involved at all.

Paying taxes is an obligation of citizenship; it's the obligation citizenship is built out of, since scutage and obligations to maintain bridges started generalizing "show up and fight" out of the Dark Ages into the feudal.

"non-citizen" and "fair game" are pretty much synonyms; the state, even an oligarchical collectivist state, won't tolerate being told it can't collect taxes. This is why viable currencies come with the treasuries and armouries associated with the ability to collect taxes.

62:

There is, by the way, a pretty good fix for bank behaviour.

Don't let men be bankers.

Insist that the people making financial decisions are female, middle-aged, have kids, and are not and have never been much above median wealth or income.

All of a sudden, the same systemic mechanisms make prudent decisions.

63:

Some of them may be doing that, but not using a government currency doesn't mean you don't owe taxes. Barter, income in foreign currency, digging gold out of the ground and trading it -- all of those are taxable.

Right now there are legal questions about taxation and bitcoin that vary by country. Is it a currency, commodity, or investment?

Several countries have said that cryptocurrency is not money, so gains in value are taxable just like any other gain in value of a piece of property.

64:

"Goldbugs and bitcoin enthusiasts have a point. They don't want to trust government to manage the money supply, because politicians are often irresponsible.

They think it's better to inflate the money supply based on random events that are largely outside government's control, because they think government will do worse than random.

On average they are wrong. But it's possible for government to make such a horrendous mistake that it's far more important than average mistakes."

But if we educate people as to what money actually is and how it actually works they are less likely to do so. Right now a lot of "economists" and politicians who know perfectly well that money has no intrinsic value are waging a very successful propaganda war to convince people that this perfectly obvious fact just isn't true.

This is like astronomers teaching students how to calculate planetary orbits using Ptolemy's geocentric model, epicycles and all, and refusing to teach them about Kepler's better theory let alone Newton's even better one.

Of course a nation of economic illiterates is in danger of messing up pure fiat money. The solution is to explain the facts to the common folks so that they can make rational decisions about it, not pretend it isn't a fact.

65:

Governments can impose a wealth transfer to themselves and to debtors by increasing monetary supply and thus inducing inflation. Many cryptocoin enthusiasts are ideologically opposed to this, probably several times more than are opposed to paying taxes.

Those who are so opposed aren't necessarily just nihilistic freeriders, either; the typical anti-tax bitcoiner is a minarchist who is prepared to bite the bullet and get rid of most of the trappings of the state, including most of what you would consider to constitute 'citizenship'.

Then there are the weird ones like me who want to avoid a future where states or post-state hegemonic entities own my computational substrate and tell me what I can do with it. See my sadly neglected comment upthread.

66:

It's neglected because there's just about zero practical chance anybody's ever going to be able to read a mind state. The idea generally makes biologists roll about laughing.

Once you've got it read, then you've got the interesting problem of running the thing on some other substrate, which isn't an easier problem than reading it in the first place.

There are, honest to Tiwaz, things you can't do with computers. Human-style cognition is very plausibly one of them, because how neurons work starts to look a lot like one of the NP complete tree traversal problems. No practical expectation of a digital simulation above very small N.

Ideological opposition to inflation, and thus fiat currencies, misses the essential point that it's velocity of money that matters, that money isn't a thing, it's an accounting convenience, and that it's really, really clear that erring on the side of some inflation is much better than a static or deflating currency if you're willing to consider the outcome across the entire population.

This is really old as a distinction; "treasure" and "hoard" are different words way back in Beowulf because there's the good kind that circulates as gifts, creating social order and peace, and the bad kind, that's got a dragon on it in the midst of devastation.

And right down at the bottom of that, in the dragon-sickness, is the idea of my money. It can't be; money is inherently collectivist, you can't have your own money because it takes a group, those treasuries and armouries and that political process, to have money at all. The idea that everyone else -- the entire mechanism of the economy -- should suffer so a little present luck should be made permanent in its consequences is risible, even considered in context of the lucky.

67:

In your previous piece about how much you hate bitcoin, you didn't include that they didn't have the resources to do adequate security.

I could gloat slightly about this since I like bitcoin people rather more than you do, but I think the civilized thing is to meditate on how remarkably hard prediction is.

68:

History is full of examples of states that mismanaged fiscal policy and whose currencies did _not_ recover from, leaving large swaths of note holders penniless.

I have a couple of $500,000,000 Zimbabwe notes pinned above my disk. They have expiration dates.

69:

Here's a buch of extremely clever people trying to kill banks, the fed, credit card companies, etc etc etc, and all I hear is boo and hiss from you.

Just maybe Charlie and many of the rest of us think the BitCoin cure is worse than the disease for the majority of people on the planet.

70:

Several countries have said that cryptocurrency is not money, so gains in value are taxable just like any other gain in value of a piece of property.

In the US I bet there are a lot of debates going on at some level about whether the gains are capital or not and do you account for them at the end of your tax year or only when converted or maybe when transferred or whatever.

This is an area of US tax law that makes lawyers and accountants very rich.

71:

And if anyone wants an empirical example of why the velocity of money in an economy is important, cast you mind back to the early months of the GFC, when the credit markets froze up. Man it was dire, our company wasn't exposed as some but we struggled. Most non business folk don't realise that modern businesses need to borrow money as part of the day to day, turn the tap off and...

72:

Currency, like justice, comes from the barrel of a gun.
I don't like your apparent attitude.
I also happen to think you are wrong.

You appear to be preaching a fake "Survival-of-the-ruthless" message.
Which is known to be false.
Please expound & justify.

73:

They're not trying to do anything other than kill the ability for a state to make them pay taxes, if there's any ideology involved at all.
Well epic fail, in that case.
H M Treasury is already publicly ststing that bitcoin are taxable - 7 "We'll have our share, thank you very much"
Because Bitcoin is still a "medium of excahnge" .....

74:

Greg, sorry to interlope, but actually it's exactly because of the "barrel of the gun" metaphor I think extremely "ruthless" strategies don't work in the long run. You tend to upset quite a lot of people, and sooner or later somebody tends to push you from the ice sheet, and nobody has seen anything...

Of course, as one Macchiavelli put it, being feared is quite well, but actually only second to being feared AND loved.

Not that I think mob justice is an adorable form of justice, but then, the Roman justice system depended on the relation between patron and client, and "il padrinoe" is the actual Italian translation used for a certain book by Mario Puzzo...

75:

Err, the Zimbabwans didn't actually use a Silvio Gesell Fan for monetary politics, did they? ;)

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

Note: Gesell is source to quite a few Godwin excursions in German "Alternatives", the reprimands both justidied and nonjustified...

76:

ELEVENTY!
YES!
This is really old as a distinction; "treasure" and "hoard" are different words way back in Beowulf because there's the good kind that circulates as gifts, creating social order and peace, and the bad kind, that's got a dragon on it in the midst of devastation.

Can we please spread this meme?

77:

Yes - you know that, I know that, but the original poster appeared to say that "this time it will be different" (!)
And that he did believe it was the way things not only worked, bur should work.
Ticks most of the boxes for fascist corporate state, actually, hence my reaction.
I think we'll wait & see if he replies, shall we?

78:

I agree. Just wanted to make sure even a "barrel of the gun" approach is subject to interpretation. As already said, sorry for interloping. ;)

79:

Haha - Obviously you have not yet been exposed to to Human Resources, which are all female territory, for Punishment by Training.

80:

Ironically, etymologically, that would make them "banksters".

81:
They have expiration dates

Might be a good idea for currency in general in as much as it discourages hording.

82:

*What* fundamentals? It has neither intrinsic value nor backing by anyone willing to guarantee it's value.

It has some of the basic attributes of money, but it lacks the factors which make dollars and euros long-term usable.

It's consistently on an up and down trajectory- when it's going up, it becomes more worthwhile to hold onto them than to use them, a bad attribute for a currency. When it's going down, well, it's simply going down. And ultimately, nothing guarantees it'll go up again if people lose interest.

83:

"Insist that the people making financial decisions are female, middle-aged" : ever heard of a middle-aged woman, of modest upbrigging, nicknamed "Miss Maggie" ?

She is at the root of a *LOT* of the current financial evil.

( http://fr.wikipedia.org/wiki/Miss_Maggie )
( http://www.youtube.com/watch?v=LohnbmgLSb0#aid=P9QMRrrbDyQ )

84:

That "Bitcoin or something similar is necessary because goverments can take bad decisions" is part of that utopian branch of failures to think that I tie up as "The End of History"

The idea that you will discover some mechanism that will solve forever the need to have actual politics to decide what is the appropiate measure at any moment, because you are afraid the decision can be very bad.

Which is as useful as to say that as you fear that the driver may swerve violently to the right or to the left and crash the car, you will make one with a fixed direction that can never be moved from the one, true bearing.

It is not the only one case; it is part of that family of utopias that think that somehow a "perfect algorithm for situation X" will be found and at that point there is no need for humans taking decisions; that governance (not goverment, governance) will become irrelevant if we found the "true" way to do things

85:

Something I suspect a few people are missing in this discussion: money (any currency) represents value in the same way numbers represent quantity, and the names of colours represent what we consider the visible frequencies of what we call the EM spectrum. They're reifications which provide human minds something we can fiddle with and consider "real" when the things we're actually dealing with are abstractions of the highest order. Human minds need this.

This is part of the psychological value of money - it's a handy little tool for comparing values. For example, I pay myself 10c per household task I complete each day. I started doing this because I needed, psychologically, to value the work which goes into doing things like keeping the house clean and sanitary, and I needed to value time spent on doing these chores more than I valued the time I spent online browsing through Tumblr or TV Tropes or similar. So I used money (which I'm saving up toward the cost of a new cell phone) to provide a measure of this value. The money isn't the valuable thing here, though - it's a marker. It's a pointer toward things like decisions about whether or not to get off my arse and wash the dishes were made or not. If I make the decision, and complete the task, I award myself a marker of value for having done it.

Or think about it this way: if you weren't being paid for your day job, would you still do it? Would you volunteer to do this job in your time off? How would you measure the value of your work, if a monetary value weren't being assigned to it?

Money (of any kind) isn't valuable in and of itself. The value lies elsewhere. Money just lets us count value, in the same way that numbers let us count quantity.

Now, on to the government question. The big thing a lot of Libertarians and pseudo-libertarians, and flat-out anarchists miss in this whole conversation is "government", in and of itself, is a shorthand reification as well. "Government" is a symbol, standing in for a series of processes regarding decision-making and social interaction occurring over time. "Government" can be understood to be a consensual (in the sense of "people gave consent to it") standardisation of meaning in a lot of ways - it doesn't create meaning in and of itself, but rather it gives everyone a standard to refer to when they say "we do things this way" or "we measure duration/quantity/volume thus". You agree to "government" because the other alternative is basically working out all of these things from scratch - for further information, just take a look at the Scots parliament, and see what they're having to do. It's the sort of thing the EU parliament grew out of - making sure the assumed rules of the game were the same for all the players in a multi-faceted trading agreement.

The bits with the politicians, and the civil servants and such? That's just window-dressing, in the same way notes and coins are the window-dressing on currency. Taxes? Taxes are the result of an agreement regarding the value (here we are, back at money again) of having these standards and rules.

Government is what we use to measure rules and standards. Money is what we use to measure value. Numbers are what we use to measure quantity. We use all of these things as reifications of the greater, more meta concept, because human minds aren't generally up to dealing with them without measurement.

Does this help anyone, or am I just talking in circles here?

86:

they retired the last of my real-time code in 2008

Which is pretty good for real-time programming, unless you have a problem that's stable for longer periods, sez this real-time programmer.

87:

Welcome to the UK. Ok, it will be labelled "2 pints" ratrher than "1 quart", and somewhere bear a small label saying "1136 ml", but you will find it on a shelf next to another container of milk labelled "1 Litre".

88:

Personally, I think this would be a very good time for Scotland to look, hard, at the Euro.

The Euro is in the dog-house since the events of 2008, and the German austerity/peripheral bleeding is still going on -- we've got the horrible example of Spain, Portugal, Greece, and Ireland to look to.

But Scotland would be starting from a very different position to the PIGS. Even if Scotland inherited a pro-rata share of the UK's national debt it'd be in much better shape than the EU's south. For another thing, it has a working tax system without the systemic corruption you see in the soft underbelly of the EU, and some actual industry, not to mention a financial sector and natural resources. (Scotland is on track to be 100%-net powered by renewable energy by 2020, and a net energy exporter -- from renewables -- thereafter: even without oil, there's an energy export industry.)

And by joining the Euro with the worst, most pessimistic outcomes already glaringly obvious, it'd be next to impossible to cook the books the way Greece et al did in the run up to the crash. I'd expect Scottish membership of the Euro zone to be little more problematic than French or Netherlands' membership.

And it would position the Scottish financial sector really nicely to pick up the wreckage (and fleeing bankers) when England votes to leave the EU in 2017 ...

89:

Why does this plan have to run indefinitely? Agreeing to use Sterling until other arrangements can be put in place seems reasonable. Oh, wait, that's assuming that the Con party can be reasonable. ;-)

90:

Denmark had the best solution to the Euro: keep the Danish crown but peg it to the new EU currency.

That way, if anything goes wrong, Denmark can cut the apron strings and get out from under.

Unlike Ireland and Greece.

91:

"And by joining the Euro with the worst, most pessimistic outcomes already glaringly obvious, it'd be next to impossible to cook the books the way Greece et al did in the run up to the crash. I'd expect Scottish membership of the Euro zone to be little more problematic than French or Netherlands' membership."


This may be a digression, but I don't think that the Greek government was fooling anybody waaaay up top in Europe by 'cooking the books'. It was simply convenient for the Big Boys to look the other way. (while profiting, doubtless).

92:

Sir, I do believe you might just be missing a point or two here. To begin with, the reason that Salmond wanted to use a strong currency such as the Euro or failing that the Pound speaks volumes as to how he sees the economy and tax base of Scotland functioning. If he were thinking on the lines of an export-based industrial economy, then a weak currency would help him export and generate wealth in Scotland.

He isn't doing that because he's not completely stupid. He knows that without a decent reserve of coal he cannot run an industrial nation; renewable energy simply is not reliable enough for heavy industry to thrive, even leaving aside such eco-lunacy as carbon taxes and the like. Building nukes takes too long to bear fruit, he hasn't got large gas reserves and wind energy is laughably unpredictable (aside from poor turbine service life). No, what Salmond is aiming to do is far, far different.

A Scotland with a strong currency but not in the EU would be ideally placed to pose as a sort of London-lite financial centre; all the tax and regulatory benefits of English-type law (English/Scottish contract law is exceptionally business friendly) but in a financial centre like Glasgow, which is really, seriously cheap to work in.

Furthermore a strong currency would permit this new country to borrow against the strength of the currency, a further incentive for financial investment.

The EU told Salmond to go take a running jump because they've already got a full quota of over-borrowed basket cases festering away in the EU, and in any case can do without yet another tax haven to rein in.

The UK told Salmond to get lost because they don't want a competitor for London on their doorstep.

Basically, Salmond could be described as stuck on Morton's Fork right now. If he loses the referendum his political career is over; if he wins then he has a nation of revolting voters who all of a sudden don't have banksters and rich bastards from down south paying most of their taxes.

As most of the rich lairds of Scotland will have done a bunk by then, probably on the same flight as the banksters and the half-dozen remaining Conservative voters, the bar for "rich bastard, tax until the pips squeak" will be set much lower.

93:

"You appear to be preaching a fake "Survival-of-the-ruthless" message.
Which is known to be false.
Please expound & justify."

You think that you could remove the threat of forcible coercion from any justice system above the tribal level and have a functioning society?

Similarly, if you have a system of currency that is designed to be outside of government regulation, do you think that's not an invitation for private shenanigans at eventual public expense? (See the article for an example). Thomas Hobbes would probably recognize that one in principle.

94:

Of course a nation of economic illiterates is in danger of messing up pure fiat money. The solution is to explain the facts to the common folks so that they can make rational decisions about it

Moar popcorn!

Next you'll be telling us that Homo economicus makes perfect rational decisions all the time when given perfect information about the state of markets.

It's about as plausible as New Soviet Man being able to live in an altruistic state of pure communism. (Human beings are not terribly rational, for the most part ...)

95:

frithiof.jensen, yellow card time. Cause: sexist stereotyping, treading dangerously close to overt misogyny. Please read the moderation policy linked to above before you comment again.

Signed: the blog's HR Department.

96:

Brain-fart/autocorrect: shouldn't have said "real-time", should have said "old-time". I blame creeping senility.

97:

who all of a sudden don't have banksters and rich bastards from down south paying most of their taxes.

You know there's a gap between tax revenues raised in Scotland and tax revenue spent by HMG in Scotland, right? And that it goes in the opposite direction to what you're suggesting?

(Also: I gather you're assuming that the £200Bn of oil/gas in the Atlantic/North Sea -- that David Cameron insists an independent Scotland couldn't exploit because it wouldn't be profitable to do so, whereas if Scotland was still part of the UK it would magically be worthwhile -- gets burned without any industrial policy or plan for doing something with it. I think that's a bit of a dodgy assumption ...)

But this is not the Scottish Independence thread. because I haven't started one yet. OK?

98:

Joining the euro NOW is a bad idea. Scotland won't want the fiscal handcuffs the Maastricht treaty imposes on euro zone members. That is the whole point of the independence vote.

In 2 years time who know though? If Scotland is on the upswing of the business cycle it may well want outside controls on inflation. Alternatively pigs may well have forced through relaxation of the public sector debt limits in the masstrict treaty.

Personally I think it's mad for governments to cede control of their currencies or ability to perform QE as needed without fiscal, political and economic union. I'd recommend joining only in a proper nation state of Europe.

99:

What is the problem with using banksters un-ironically? I understand the general disinclination to use inflammatory and pejorative terms because it's easy to cloud reason with emotion get swept along to wrong conclusions. It's easy to posterize a million nuanced shades of gray down into simple, compelling, inaccurate black and white. We like to have goodies and baddies in our stories and keep the differences sharply defined, thank you very much.

But hasn't their behavior in the recent years gone past explanations of incompetence or a few bad apples and instead shown that the entire system is horribly, possibly irretrievably corrupt and broken? The LIBOR scandal to me says nobody is to be trusted. "This dwarfs by orders of magnitude any financial scam in the history of markets." -- Andrew Lo, MIT Professor of Finance

100:

Goldbugs and bitcoin enthusiasts have a point. They don't want to trust government to manage the money supply, because politicians are often irresponsible.

They think it's better to inflate the money supply based on random events that are largely outside government's control, because they think government will do worse than random.

To abuse a metaphor: money is essentially the blood of the body economic. A body needs blood; not too much, not too little, just enough. The blood supply expands as the body grows. It seems to me that it might make sense to scale the money supply to demographic metrics that are hard to fudge. We've been fudging this sort of thing pretty badly, lying to ourselves such as how we calculate the rate of inflation, unemployment, poverty levels, etc. But if we could get people to agree on these numbers in an open and public fashion, daresay the same way scientists can operate with the same body of undisputed facts, then perhaps we could use this formula to provide just enough money and no more.

I'm a big fan of the idea of the basic guaranteed income. Everyone gets $xx,xxx per year. Possibly it starts at birth and grows until you hit majority. You get it until you die. It's not meant to be luxury living, it's meant to cover the essentials. If you can't work, you won't starve to death. If you refuse to work, you won't be living high on the hog. If you choose to take a job that can't pay a living wage in and of itself, it might still be enough to boost you to a decent lifestyle. I'm thinking social work, public service, the kind of thing that's necessary but the market doesn't really reward. Nationalized health care would be baked into all this.

So, what if you want a grander life than the basic income affords? That's when you study and go for a career. Education should be free. Some people are driven, want to do big things. Some people are driven to have fancy possessions, status symbols, phallus substitutes. Ok, fine, you can have them. But there's still a cap to your success. You can be a tens of millionaire. You're not going to be a billionaire. That's just obscene. That sort of wealth concentration is symptomatic of a diseased economy and a sick society.

It's clear that there's more than enough to go around, materially speaking, so long as we don't let the psychopaths in suit and tie decide how things should be allocated.

101:

Actually, most of the differences between different groups are of a statistical nature, with some members surely qualifying as outliers. So while the mean of housewifes and managers might differ, there is nothing against one or two housewifes being more hardcore than most managers, while one or two managers might make excellent, err, housemen.

Actually, if the managers are not bastards because they are male, but actually are managers because they are male AND bastards (AND maybe otherwise competent), chances are the women who make it up the greasy pole might compensate by being either more competent or even bigger bastards. Of course, "affirmative action" or similar would change that somewhat.

NOTE: Please don't understand this as me implying successful women or members of other minorities are necessarily worse than the usual suspects. As already hinted at, it might also just be them being more competent, maybe in areas usually neglected by the usual suspects. It's just positive stereotypes are just as errorprone as negative ones. Whatever, if somebody wants to use the loving mallet of correction on lease from Scalzi, proceed. ;)

102:

Ironically, etymologically, that would make them "banksters".

Umm, not in Modern English --think Master & Mistress. (also see recent Wm. Gibson twitter discussion on a male seamstress being a seamster.)

Following the links in your link leads to:
bankster (plural banksters)
(informal, derogatory) A banker who is seen as criminally irresponsible, or as extorting bailout money from the taxpayers.

103:

So a female banker is a bankress?

104:

'They think it's better to inflate the money supply based on random events that are largely outside government's control, because they think government will do worse than random.'

"Of course a nation of economic illiterates is in danger of messing up pure fiat money. The solution is to explain the facts to the common folks so that they can make rational decisions about it, not pretend it isn't a fact."

'It is difficult to get a man to understand something, when his salary depends on his not understanding it.'

How does it benefit common folks to understand the details of the money scam? It doesn't help them to get ahead relative to each other. And if they truly understand how the system works, then the elite fraudsters will change the system in subtle ways so they don't understand it after all.

It makes sense to me that if the details of interest rates and money supply are open for elected politicians to manipulate on a month-to-month basis, they will try to manipulate them for their own short-term gain. I don't want that.

Instead we might have a system where some of those details are handled by an elite group that is insulated from short-term political schemes. Maybe an elite group of bankers. I do not feel particularly reassured by this.

I am not sure who I want to have that power. Maybe an elite group of Franciscan monks who have taken vows of poverty and who say they want good for the world? Likely they'd arrange things to increase the wealth of the Vatican, but that might be among the better alternatives....

105:

If we were on a gold standard, and there were bankers who were banking gold coins, and a bank had bad security and got stolen from and then an audit showed that they didn't have anything like 100% reserves -- if something like that happened, would you conclude that it meant there was something wrong with gold coins?

If the same thing happened with paper dollar bills, would it mean there was something wrong with paper dollars?

How come the first time it happens with bitcoins people talk like it means bitcoins are bad? They might be bad but when somebody pulls exactly the same scam they pull with every other currency, how does that make bitcoins special?

106:

Well, it's both, isn't it? On-line transaction processing comes under real-time software, because it's expected to react to user inputs in a few seconds.

107:
Maybe an elite group of Franciscan monks who have taken vows of poverty and who say they want good for the world?

Historic precedent says this might be a BAD idea, but maybe we could tweak it somewhat; make that two orders administrating the money in a zero sum game. Historical precedent indicated the Dominicans, another Catholic mendicant order. Macchiavelli never made it because he couldn't keep up with the Italian Popes of his day. ;)

http://onlinelibrary.wiley.com/doi/10.1111/j.1477-4658.2010.00665.x/abstract

108:

So a female banker is a bankress?

I think you mean 'bankstress', but no, a female banker is a banker.
(I don't do smileys, just assume implied humor.)

109:

Imagine that we got the internet really reliable. Then we could use barter instead of money.

The government could still have a medium of exchange to make things easier, it would just not be something that people owned. Call the unit of exchange a "schmoo".

You would not at any time own any schmoos. But anything you want to sell you could quote a price in schmoos, and any time you want to buy you could dicker over the price in schmoos.

So, say you want to sell a cow. The buyer agrees to pay 4000 schmoos for it. He picks it up, owing you 4000 schmoos. He holds your cow. Then you buy a candy bar for 1 schmoo. The sale goes through. Now you own 1 candy bar and 3999th of a cow. The store you bought the candy bar from pays the distributor for two of the candy bars they delivered, and now owns 1 more candy bar than it did before. The distributor pays somebody else for 1 schmoo worth of something etc.

Every trade is a circle in which people barter what they have for what they want, denominated in schmoos which are not owned by anybody, not a store of value, not really even a medium of exchange. Only a unit of exchange for bargaining with.

Would there be anything wrong with that?

Would it be easier for people to understand?

110:

Charlie...
Really?
Then waht's the Barnett formula for, where Scotland gets more money from the tax system than the reast?
Or is something going missing somewhere?

111:

'Maybe an elite group of Franciscan monks who have taken vows of poverty and who say they want good for the world?'

'Historic precedent says this might be a BAD idea,'

Well, yes. But who can you trust with this power? I can't think of anybody uncurruptible offhand.

If nothing else there's assassination threats. If a US president privately threatened to kill Federal Reserve Board members unless they did what he wanted, how many would he have to kill before he got a majority who'd go along?

"but maybe we could tweak it somewhat; make that two orders administrating the money in a zero sum game."

If the game was somehow set up so they won by doing the right thing, that would be fine. But if somehow they sometimes won by doing the wrong thing, it would be hard for them to cooperate do do right instead of compete to do wrong. So it's only a solution if you can set up the system ahead of time so they are rewarded for doing the right thing.

If you're sure you know ahead of time what to reward, why not write out the rules as a computer program and then automate the system so corruptible humans are not involved?

112:

We're going to need a Guaranteed Basic Income scheme really badly in the next few years, as automation destroys more and more jobs. (Hint: The Economist agrees with this, kinda-sorta.)

113:

Money is notostly about representing value. It is created ex nilhilo in response to demand.

Money is liquidity. It is a fluid that facilitates trade and pauments. You can do trade without money if you have an accounting relationship- eg you can keep ledgers of debts owed in any currency you like. The currency itself is irrelevant.

What is necessary in modern economics is that as a previous commentator stated that neither too little or too much money is created.

Destroying or creating it is a function of banks and government fiscal policy and should but doesn't include central banks creating or destroying liquidity outside of central bank reserves.

114:

[ DELETED BY MODERATOR - reason: tastelessness verging on sexism ]

115:

Has anyone ever tried to do a policy-enactment/implementation-(cash)flow model? From the perspective of the government, there's a lot of activity that needs to happen before any government policy is enacted, e.g., new departments set up, new forms/websites created, hiring/training personnel, etc. There is no such/equivalent built-in time delay for the private sector/banks. This typically translates into the private sector being able to discover and implement all sorts of loopholes before any of the 'predicted'/legislated benefits of the proposed legislation accrue to the public. Any practicable work-around suggestions for this?

116:

A male or female banker is a waste of human potential.

117:

Charlie @112 : for many of the Modern Monetary Theory crowd either a citizens allowance or job guarantee is the cornerstone of economics. The number one goal.

118:

The problem with your argument is that if we were talking about gold dollars, or paper dollars, then the deposit in the bank would be guaranteed by the US government. Same for pounds and UK government, etc.

Suggesting that, maybe, there was a bit more to solve in terms of making a currency that the technical aspects addressed by Bitcoin; the same kind of stuff that is so abhorrent to the Bitcoin libertarian digital goldbug fanbase.

Sucks to be one of the "investors" now asking Japan government about what to do and receiving a loudly "why? Is not like this is my responsability, its completly unregulated... just like you like it".

119:

"Money is not[ m]ostly about representing value. It is created ex nihilo in response to demand."

Yes, it is. But does it have to be?

Money *does* represent value. Somebody who has a million dollars in the bank and nothing else, has a lot of value that might be lost to inflation unless he does something with it.

If the government creates money in response to demand and gives it to you, it has given you spendable value.

Whoever gets to create money has a claim on real stuff. If a bank loans you money at 6% interest, and all goes well and you pay back the money and the interest then the money you borrowed disappears -- but the interest does not disappear. The bank has it.

Other things equal, if GDP grows by 3% then somebody gets to create 3% more money and spend it. That doesn't usually amount to spending 3% of GDP because other things are not equal, but it could. Nice work if you can get it!

If we used schmoos instead of money, they would be only a convenient unit to bargain with. You would buy and sell what you are actually buying and selling, and schmoos would not be a store of value at all.

120:

"The problem with your argument is that if we were talking about gold dollars, or paper dollars, then the deposit in the bank would be guaranteed by the US government. Same for pounds and UK government, etc."

Sure. Back in the days of wildcat banks that wasn't true. Banks had to do a lot to persuade people they were safe. They invested in big beautiful strong-looking safes. They invested in bank buildings with marble and glass and granite, places that looked particularly respectable. Bankers themselves presented a stuffy conservative appearance. And still when there was a bank run people didn't believe their money was safe, and it wasn't.

I haven't looked into bitcoins much, not being ready to invest in them. Do they need banks? If everybody just took their bitcoins and kept them in their own thumbdrives or wherever -- maybe in a bank safety deposit box if they feel insecure -- what would be wrong with that? Why would somebody want to leave them in MtGox in the first place?

It sounds like bitcoins are not particularly money at the moment. Like people tend not to spend them, but instead keep them in case they appreciate in value and then not spend them when they do. Like Tim Whitworth said, a small investment to prepare for some sort of apocalypse. We won't see how well they work as money until people actually use them mostly as money.

121:

I am not sure who I want to have that power. Maybe an elite group of Franciscan monks who have taken vows of poverty and who say they want good for the world? Likely they'd arrange things to increase the wealth of the Vatican, but that might be among the better alternatives....

To my way of thinking, it might be nice for public servants to be a type of clergy who take vows of, well, not poverty, but sufficiency. You become a public servant, you will be in the pension plan for life. You will not have to worry about lining your pockets to provide for yourself in your old age. But this also means you are banned from holding any kind of investments, receiving significant gifts, services, etc. from third parties and so forth. If you are a public servant, you will never be able to become rich. And if you break your vows, it's treason. They should be perfectly disinterested, as in "not influenced by considerations of personal advantage."

Still, we've seen enough corruption in the Vatican to know vows of poverty don't stick. But there's no punishment, either.

122:

[ DELETED BY MODERATOR - don't make me get my big stick out, m'kay? ]

123:

While looking to see if "Bankster's Moll" was a thing (y), I found this bit of etymology
http://nancyfriedman.typepad.com/away_with_words/2008/09/banksters.html
(y) earliest known usage in 1933
(Feel free to update wiktionary; not my thing.)

124:

(Feel free to update wiktionary; not my thing.)

Not mine either.
I note, the the article you link to, that the word has anti-Semitic, and possibly anti-Scottish, overtones. Being both, I think I'll avoid using it.

125:

There have been a number of local/alternate currencys set up in the UK we have the Brixton Pound and Bristol Pound

126:

Next you'll be telling us that Homo economicus makes perfect rational decisions all the time when given perfect information about the state of markets.

Well no, I won't be telling you anything of the sort since I agree with you about human nature. All I want is to counter the, to my mind, main destructive memes that money has an inherent value, that the government can "run out of money" and that pure fiat currencies inevitably lead to hyperinflation.

We managed, after all, to convince most people that the earth is spherical and that it orbits the sun. Of course neither is exactly true, but it's a lot closer to the truth than that the earth is flat and the sun, planets, and stars orbit it.

It's about as plausible as New Soviet Man being able to live in an altruistic state of pure communism. (Human beings are not terribly rational, for the most part ...)

They certainly aren't, I agree, but the most destructive illusions can be countered and we've managed to do that, mostly, with a few of them. We need to destroy the destructive memes about money and value as well. People like you can see through it, I only have a high school education and I can see through it. Well, I am selling myself down a bit. What I really have is an Isaac Asimov education having lucked into reading his non fiction at an early age.

It won't be easy or fast, but I have to believe it's possible based on what we've been able to do in the past. Progress has admittedly been extremely limited, but it's happened, and in the process it has transformed our world. Not, of course, always in a good way...

127:

"I'm a big fan of the idea of the basic guaranteed income. Everyone gets $xx,xxx per year. Possibly it starts at birth and grows until you hit majority. You get it until you die. It's not meant to be luxury living, it's meant to cover the essentials."

I have a rationale for that.

Automation tends to require high fixed cost and then low variable cost. This is not particularly compatible with capitalism.

Imagine five computer-chip companies that each spend $1,000,000,000 building an automated factory to produce competing chips. The difference in cost for a factory that can produce a maximum of 100 million chips/year versus 400 million chips/year is very small, so they can each produce 400 million chips at a variable cost of 30 cents/chip.

The demand for computer chips at $300/chip is 10 million/year, the demand at 30 cents/chip is 100 million/year.

A single company could get back its billion dollars in 4 months and then do whatever it wants.

Five companies will just about pay the interest on their debts until some of them go bankrupt.

Free competition just does not work with those (admittedly made up) numbers.

With automation, over a wide range the per-unit costs go down sharply as production increases.

So for many things, we could easily afford to make enough for the whole population. Why not? Give them to all citizens.

In deference to conservatives, we could make the things that are given to all citizens look cheap. Clothing that has no money spent on advertising, marketing, etc. Food that has been carefully researched to be nutritious, palatable, and with a long shelf life, as has been done for every commercial brand of dog food. Etc.

Produce enough for everybody. Give it to everybody.

Perceived quality can go up when voters are ready to say it should.

128:

One thing that Bitcoin does have that is interesting is a public register of all transactions. The problem with Basic Income and Social Credit theory previously was what Hayek called the synoptic delusion - the impossibility of knowing the totality of all transactions and thus growing the money supply at the correct rate to account for growth. What if we had a universal transaction register for the UK, and that the basic income was funded by the needed expansion of the money supply?

129:

"If we were on a gold standard, and there were bankers who were banking gold coins, and a bank had bad security and got stolen from and then an audit showed that they didn't have anything like 100% reserves -- if something like that happened, would you conclude that it meant there was something wrong with gold coins?"

This is more or less exactly the premise of Terry Pratchett's novel Making Money, and the book makes a pretty good case that "something wrong with gold coins" is indeed the correct answer.

130:

Personally, I think this would be a very good time for Scotland to look, hard, at the Euro.

Depends on your time horizon, I guess, and what you expect from the ECB.

Unfortunately, one plausible reading of what's been going on in the Eurozone for the past few years is that the ECB has been behaving effectively like a continuation of the purely German Bundesbank, and has happily followed policies that were in the best interest of Germany (and, to a lesser extent, France) even when the effects on the periphery were utterly ruinous.

It may well be the case (as you argue) that ECB monetary policy will be favorable to Scotland immediately after independence. But it's another thing to believe that that state of affairs will continue indefinitely. And another thing that we've observed about the Eurozone is that (as in the case of Greece) it's really hard to leave, even when purely economic considerations would overwhelmingly favor the move.

(In fact, I would have thought that one good argument against the Pound currency union the SNP favors is simply that it would leave Scottish monetary policy in the hands of the Bank of England, which might not have any reason to act in Scotland's best interests. The ECB is rather farther off...)

131:

"This is more or less exactly the premise of Terry Pratchett's novel Making Money, and the book makes a pretty good case that "something wrong with gold coins" is indeed the correct answer."

I would argue that gold coins are not the issue. The issue is leaving commodities with commodity brokers who do not feel responsible to keep your commodities but only to give you similar commodities when you demand them.

You, the owner, would probably prefer that the value of your property goes up over time.

The broker prefers that the value goes up and down because he profits from increased transactions. He will sometimes sell the product you stored with him, to drive the price down. If he fails you might make money off of him. If he succeeds he uses the commodity you entrusted him with to act against your interest.

Bankers use your money to inflate the currency.

Stockbrokers use your stock to drive down the price of your stock by letting somebody else short-sell it.

Etc.

Why do you let them do it? Because those are the rules of the game. The bannking game designed by and for bankers. The stockmarket game designed by and for stockbrokers. If you don't like rules then don't use banks or stock markets.

Well, but in the USA you have no choice but to use banks. If the police find you with a significant amount of cash they will take it away from you on the assumption you are a drug dealer. They might take your house or car too but you can get those back if a jury decides you never had any drugs. They keep the money. You can only get away with not using banks if you are so poor the banks don't want you and you have to use a check-cashing place.

So why would you leave your bitcoins with a bitcoin broker?

Given what we've seen from other commodities, isn't that just asking for it?

132:

Do note that I specified _staying in_ that middle-of-the-middle-class bracket, which Baroness Thatcher most obviously did not.

I am perfectly willing to entertain the possibility of a social status construction for males in which prudent husbandry dominates. It's not the one we've got, anywhere in the anglosphere. Whereas not making mistakes gets hammered into smart little girls with great force, and on terms with no exceptions. It's not perfect, but it would be better.

133:

Banking is a vital economic function, the marriage of capital to appropriate levels of risk. Really seriously useful. There's a reason fractional reserve banking, aka borrowing from the prosperous future, is sitting there at the start of the Renaissance.

Extracting rents and instituting debt peonage are very, very bad. But they're not essential features of banking, they're just a tendency among people who are really focused on believing money is a thing.

134:

There is, a few parts of the economy are counted as UK revenue without being assigned to any specific part of the UK. The most relevant is oil. If you split the oil revenue on the line of equidistance (which is the default for maritime borders) then about 80% goes to Scotland. If you were to use the current boundary of Scots law (a straight line due east from the border) then the percentage is even higher. Either way if oil is accounted for then Scotland is a net contributor.

135:

The co-op bank managed to demonstrate that while professional bankers might not be very good at it, amateurs are considerably worse.

136:

If you're going to genetically modify the geese to refine gold, you absolutely have to get the output to be stored in the eggs somehow.

137:

So : what would make a digital currency like the BitCoin work ? How would a state Treasury go about setting up a digial currency ? ( This would be especially great if they could eliminate all nusmismatics. You could have a ' change card ' instead to store fractions of whatever your basic unit is. It costs 8 cents to make a 5 cent nickel in the US ... Something has to be done )

138:

Talking of which ..
"Standard Life" - a big Scottish Insurance company, founded in Waterloo year, are publicly saying that if the Scots decide they want the wee Eck (a.k.a. The psychopathic Weasel) as their town boss, then SL are off South ... caveats ... if Scotland is only pretend-independant (i.e curency union & taxation ahrmaonisation with England etc) then they will probably stay.
Err ....

[ No, I don't like Salmond: he gives me the same all-over creeps as, previously Harold Wilson, Reginald Maudling, Jeremy Thorpe & Slimy Cecil Prick (Parkinson) did .... ]

139:

Ah, so that explains why, as a quid pro quo if the Scots' fall for Salmond's vision of a nanny-state even worse than the one we have at present, that the Barnett Formula would have to go, as a re-balancing exercise.
Makes some sort of rational sense, I suppose.

140:

How about if the Bank of Scotland issued Ponds which were pegged one to one to the Pound (until they weren't). Then you could go to the Glasgow PondLand and get a plastic bag of goldfish for one Pond.

Seriously though, if Scottish independence happens, the pound is made impossible and the Euro is unwise, are there any other alternatives? Why shouldn't an Independent Scotland have it's own currency?

141:

Standard Life? I had one of their endowment profits. Not the most stable of institutions, lately. And if you haven't noticed HMG leaning on every available lever in hope of producing Booga-Booga warning noises of the impending catastrophe that will follow in the wake of Scottish independence, then you've been asleep at the switch. (Yes, this includes Foreign Office briefings at embassies talking down Scotland, and leaning on corporate cronies to say stupid shit like "we'll walk".)

142:

That is pretty much what Ireland did at independence, the Irish pound was linked 1 to 1 with sterling until 1979, shortly after Ireland joined the ERM. Ireland had decimalised simultaneously with the UK.

There isn't any reason that Scotland cannot do an informal currency union, of which there are a number of examples world wide. What would require UK agreement is a formal currency union or a formal currency union with common policy. With an informal currency union the danger is that the issuing authority will base its policy entirely on what will benefit the UK and ignore Scotland, much the way that the ECB seems entirely focussed on Germany and adopting a policy that is a little on the tight side for Germany and far too tight for most other Eurozone members.

143:

My view from down here in England is slightly different - not of what is being said, but of the target and intended effect. By now it's not about scaring Scotland into submission, it's about geeing up the rest of the UK to firmly reject DevoMax should a No vote occur and to blame the Scots for any issues arising from a Yes vote.

I think it would be a mistake to assume that as of today the main parties - well, the Tories at least - actually want to keep Scotland in the Union. If it works then a lot of Labour seats disappear, if not then the Scots get the blame for leaving. What's not to like ? If you're an English Tory that is.

144:

Disagree
More years ago tha I care to remember, I thought of myself as a left-wing tory. I'm also an ex-member of the Lem-o-Crats.
But the O-window has moved to the right, I think, and what's much worse, in a strongly authoritarian direction, no matter whetehr your party preference (if you have one) is "left" or "right"
Charlie's dark imaginings in the upcoming "Dark State" etc are only too real & present.
However, I would love Scotland to remain "IN" if only because that surely increase the chances of Devo-Max for everyone?
A much better outcome.

[ And no, I most definitely have not been asleep.
My occasional post-graduate Endinburgh student contact thinks a maximum of a no greater number than 35% will vote for Salmond as Boss, & that said percentage is declining. ]
But, again, that is just one opinion ....

145:

However, I would love Scotland to remain "IN" if only because that surely increase the chances of Devo-Max for everyone?

That would be a good outcome, but it isn't going to happen within a generation. The Westminster system is inherently centralizing -- it took a huge tax rebellion and the near-threat of outright secession in 1997 to force a devolution referendum through -- and since the Tories spiked the referendum on electoral reform for the Commons there's no appetite there for delegating more powers to the periphery. Quite the opposite, if anything.

If Devo Max was on the referendum ballot as part of a three-way choice, it would win by a mile -- last time I saw a poll, a large absolute majority of the Scottish population wanted it and preferred it to independence or the status quo. Which is why Cameron ruled it out, both as a ballot option and as an option in event of a "no" vote.

146:

Hmmm... Large financial organisations threatening to leave. I can't help but feel that a common response will be "good" (or less polite variants thereof).

(I wonder if it is possible to deport a company?)

I'm of the impression *all* currencies have the same problems. For instance:


  • Theft: put money in bag and run away (they just vary in how you put it in the bag )

  • Fraud: use photocopier (for differing values of photocopier, which can include creating dangling pointers like the CDS) and run away with whatever you traded for.

  • Movement: "buy" enough to manipulate it the way you want. the run away with the profits.

My impression is that the currencies with a smaller total size are more vulnerable to the above. However, their smaller pot size makes them less attractive, so they seem less vulnerable. That is, until they start trending...

As someone, I forget who said: "Anything Man invents, Man can crack."

Only real answer is to make sure there's nowhere to run away to. You know, outlaw all those secretive tax havens with dodgy laws that almost all world leaders/owners have a vested interest in protecting.

147:
(I wonder if it is possible to deport a company?)

Probably, given that corporations are legally speaking, people. I think the Ford corporation was charged with negligent homicide awhile ago. Don't remember the outcome.

148:

I'm pretty sure the doctrine of corporate personhood is a US perversion -- it's not true in the UK, AIUI. (I need to ask a law professor.)

149:

Re: Movement: "buy" enough to manipulate it the way you want. the run away with the profits."

If you're a broker or a banker you don't even need all of your transactions to make a profit because any transactions that are posted by your subscribers/ customers generate profit. (Just like a casino.) And, since it's your software that lay traders are using, it's probably not that difficult for you the bank/trading company to spot a trend and beat out the amateur traders by a couple of milliseconds, and one-hundredth of a penny on your ask/sell price.

Some time ago this blog discussed a transaction tax on share purchases/trades. The regular at-home lay trader would scarcely feel it - because you'd need to levy maybe a penny-per-trade-transaction to bring in billions in tax revenue from the banks/brokers who almost entirely now use automated trading algorithms, basically 'bank robots/automata'.

150:

The basic definition of a corporation in English law is that it is an organization with a legal personailty -- i.e. it can be sued, be a party to contracts, etc. as an entity. (A partnership, by contrast, is not a legal entity and partners are jointly and severally (via implied agency) equivalent to the partnership.)

It is the extension of this to other aspects of what a human being can do which is peculiarly USAn.

151:

Hmmm... Large financial organisations threatening to leave. I can't help but feel that a common response will be "good" (
Oh dear
They employ well North of 5000 people - mostly in Edinburgh or Glasgow.
NOT a good move.

152:

Actually we invented it. Setting up a limited liability company by a quick and easy procedure rather than by parliamentary charter was established by legislation passed in the mid 1860s, the US followed suit about twenty years later as it had been a huge success. It terms out that giving a company the ability to make contracts in its own right own property and be sued is really useful and has been copied by pretty much the entire world. Legal personhood isn't some add on to corporations it is the fundamental nature of a corporation, having legal personhood is what makes it a corporation as opposed to a partnership or a sole trader.

153:

For those 5000 people, if they lose their jobs, yes. But *some* of them (10% to 20%?) are probably paid to a level that distorts things like the housing market. And it wouldn't surprise me if the offices are cleaned by people on the minimum wage.

Whenever I look at them, the Edinburgh house prices (like those of London and the home counties) suffer, IMNSHO, from the distorting effects of a small number of very well paid people.

And even if the company does move, who is to say it will move? It'll probably just be a legal nicety for the purposes of another HMRC tax break (I know, I have near terminal cynicism).

154:

Probably, given that corporations are legally speaking, people. I think the Ford corporation was charged with negligent homicide awhile ago. Don't remember the outcome.

The legally people is a non-sense. They have all the legal benefits with none of the consequences. Taking the corporate manslaughter case, I think you have to prove who did something wrong. It's kind of like, in a normal murder case, having to prove which neuron committed the murder.

And to the best of my knowledge, there is no "Mental Health Act (Corporations)" yet. Much as I might wish there to be one.

(If anyone knows of an cynicism antidote, I'd appreciate hearing about it.)

155:
I'm pretty sure the doctrine of corporate personhood is a US perversion -- it's not true in the UK, AIUI. (I need to ask a law professor.)

The personhood of a corporation might be a nice background to a Laundry novel, if it's not already in the works.

156:
(If anyone knows of an cynicism antidote, I'd appreciate hearing about it.)
Type "kittens" into Google Image Search. Only works while looking at it, though.
157:

Ouch. Google images offers to narrow the search and the third narrowing choice is "... with guns". Maybe it's US-only.


158:

I believe in the US it stems from people not giving up rights when acting collectively that they have individually, unless that right is only applicable on an individual basis. In that regard corporations are treated the same as clubs, societies, non-profits, unions, etc. Religious organizations get extra protection.

The recent concern about corporate person-hood comes from the Citizen United case. But that actually didn't have anything to do with corporate personhood. It was over a non-profit lobbying group that wanted to distribute a movie and the FEC said it was illegal electioneering.

The court essentially ruled that the First Amendment applied to associations of citizens as well as individual citizens. Whether or not a corporation is a person, it is an association of persons, who can collectively exercise their right to speech. Had the FEC won, it would potentially mean that any time 2 or more people get together to talk about politics it could be regulated, unless they were members of the "press".

159:

rather than merely being a pointer to a counter in a game which becomes more valuable the faster things change hands

This reminds me a bit of a theoretical 'bank tax' -- sort of a reverse interest -- based on the idea that a currency should actively discourage its own hoarding. A digital currency could do this automatically, without necessitating it involving a bank (and thus avoiding the transfer of funds from banks to very secure mattresses), and make the money simply disappear rather than being transferred to the state.

160:

Odd thought occurred to me as I was doing the wash the other day...
Bitcoins seem like what would happen when a lazy techie got involved in a labor-backed currency like Ithaca Hours. (see http://en.wikipedia.org/wiki/Ithaca_Hours )
"Oh, that looks like too much effort, I'll just automate it."
In comparing the two, however, you get exactly opposite means of generating value. One needs no capital or money (besides basic tools, sometimes) to "mine" Hours, just time, effort and skill.
One needs nothing but capital and money (for electricity and space) to "mine" Bitcoins.
Kids these days...

161:

This doesn't differ that much from many nation state currencies which are backed on the "good faith and credit" of the polity.

162:

Regarding post-capitalist societies, I wonder what folks think of the "RICH Economy" that His Holiness Robert Anton Wilson advocated as a solution to the Automation Blues: http://www.deepleafproductions.com/wilsonlibrary/texts/raw-RICH.html

163:

This reminds me a bit of a theoretical 'bank tax' -- sort of a reverse interest -- based on the idea that a currency should actively discourage its own hoarding. A digital currency could do this automatically, without necessitating it involving a bank (and thus avoiding the transfer of funds from banks to very secure mattresses), and make the money simply disappear rather than being transferred to the state.

This was implemented in at least one online virtual reality years ago (like a MMORPG or Second Life, but predating that), combined with a guaranteed minimum income. Players could draw an income 'for free' just by showing up and that money slowly evaporated if it wasn't spent. They could also earn money through their efforts, which they could save as long as they wanted. There were various other features of the two currencies, but they spent exactly the same. It worked pretty well, and for a long time by internet standards.

That the central bank didn't need to even pretend to balance payouts and collections made things much easier. In the real world this would probably cause some people to fall into a ranting frothing fury...

164:

Re: "Anything Man invents, Man can crack." Sounds to me like something from the Lensman series. I enjoyed reading them when I was a kid, but these days, they really strike me as describing a full blown dictatorship, with a whole slew of problems on the side that aren't really looked at in detail.

I'll try to dig up the exact quote from that series later tonight - the books are on my shelves somewhere...

And on a different topic - "Devo-Max"? ... *googles* Ah, I see.

165:

And it seems, from this report on the BBC News web site, that The MtGox bitcoin exchange has filed for bankruptcy protection.

166:

The only part of Wilson's article I find unrealistic (or not thought through) is "offer $100,000 to any worker who designs a machine which replaces him." No individual is ever "replaced by a machine" -- rather, entire production chains with multiple workers get replaced by very different production chains with fewer workers. There is no 1:1 correlation between specific humans in the first chain and specific machines in the second.

But other than that, RICH society seems to be pretty standard description of how a largely roboticized economy would work. Wilson is not being terribly original here. Well, maybe at the time he wrote it, he was. One anachronism that jumped out at me: "people can spend only so much time fucking, smoking dope, and watching TV". Today it would be "fucking, smoking dope, and playing online games".

167:

Education, medicine, work/occupation sectors, ... goods and services providers in general ... all recognize that society (their marketplace) is made up of a large variety of individuals/niches. Further, a key indicator of assessing how developed a segment is is the range of offerings/degree of specialization within that segment.

Given the above, how is it that discussion of economics usually ends up focusing on some one-size-fits-all policy? What is it about economics that makes people feel that there is only one way [their way] to conduct transactions? Does this mean that we should also have multiple tiers/types of currency?

168:

On corporate personhood vs Laundry novels: What happens to the employees when the corporation itself embodies the wrong sort of calculation? For that matter, since OGH is so fond of eusocial animals, what happens when an ant colony does?

169:

This reminds me a bit of a theoretical 'bank tax' -- sort of a reverse interest -- based on the idea that a currency should actively discourage its own hoarding.

The US used to have this for all corporations. Called a retained earnings tax. Now it just applies to C Corps. (In very simplified general terms partnerships for taxes, corps for legal purposes.)

The intent was to encourage corps to return "excess" cash to shareholders as dividends. It was dropped so that companies could build up cash reserves to do major investments without having to borrow. The main argument against it as I recall was that it encouraged the "status quo" and discouraged new big investments by companies. Think Intel and fab plants and such.

170:

I've always had an issue with the built-in deflation of Bitcoin. As for gold, I frequently tell gold-nut friends, if hard times come and I have food, your shiny metal is not going to persuade me to give it up. I, of course, have never owned electronic currencies. I have never owned precious metals.

It must be difficult to condemn bitcoin by comparing it to the banking system that took out trillions of dollars in off-the-books taxpayer-backed loans just to survive a few years ago. Most of our financial companies' leaders (and our financial regulators' leaders as well) might be behind bars if Teddy Roosevelt were in office today.

Still, the value of bitcoin, dollars, Krugerrands or any other currency is that you can exchange them to get something else. So far, all three of the above still have that. Until one or more of them lose that value, it is premature to call any of them play money.

171:

I feel like you're conflating currencies with financial systems. In an alternate universe (or possibly the future), what stops Bitcoin from having insured banks? Theft still happens with cash. As far as I am aware, the ability to print money is not closely tied to theft prevention and amelioration.

172:

This was probably not a good time to invent and release to the public a Bitcoin ATM, but it's out there. For the last few weeks, people in Boston could do their Bitcoin banking without the fear of being tracked by their IP addresses - just walk up and put cash into the box! (It may also be possible to get cash out of the box; interestingly, the articles don't mention that part.) Others are said to be coming to Seattle and Austin.

173:

I have used the Bitcoin ATM! (ATM feels like the wrong word for it, but "Bitcoin vending machine" conjures up an even more incorrect vision. Oh well.)

As far as I could tell, it wasn't set up for converting Bitcoin -> USD; there was just a bill slot, a camera (for reading the destination address as a QR code), and a touchscreen that gave the current exchange rate and an "OK, done putting in $" button. Unfortunately, it does not give receipts. That's probably going to bite them.

For me the most exciting thing was that it was the first time I had seen a QR code be useful.

174:

I assume you know this but I do have to point out that Greece was the only southern country that cooked the books in any significant way (I guess Cyprus counts too?). The other countries are in trouble because when the EU economy was doing well, money was too loose for them (but not in the north), and after the bubble burst money stayed too tight (but not in the north). Now you could argue that Scotland is much closer to the economies of France and Germany, and thus benefits from current ECB policy. But while ECB policy has been good for central/west europe in the past few years (as long as they didn't try to save money in a slump, like the Netherlands), there is no reason it could not be reversed in future (though political dominance of the central bloc makes it easy to bend the rules their way). The long-run solution to all of this is greater fiscal integration (e.g. fiscal transfers to the south when things go belly-up), which seems exactly the kind of thing Scotland is trying to leave the UK for.

The whole idea of a common currency for a bunch of different national economies without any other forms of fiscal integration was a fallacy to begin with. Having Scotland join would IMO be a monumental mistake. Luckily for Scotland the chances of the EU actually accepting a bid to join in any reasonable time frame are between zero and nil.

(Pegging to the Euro is a worse idea because the ECB would be under no obligation to take into account the state of your economy when making decisions, and unpegging when necessary might seem like a good solution but requires IMHO way too much political friction to be done in any timely manner. What you need is your own, independent, central bank with the right mandate and semi-independent oversight mechanism.)

175:

The schadenfreude continues...
http://flexcoin.com/

Flexcoin is shutting down.

On March 2nd 2014 Flexcoin was attacked and robbed of all coins in the hot wallet. The attacker made off with 896 BTC, dividing them into these two addresses:

1NDkevapt4SWYFEmquCDBSf7DLMTNVggdu

1QFcC5JitGwpFKqRDd9QNH3eGN56dCNgy6

As Flexcoin does not have the resources, assets, or otherwise to come back from this loss, we are closing our doors immediately.
Users who put their coins into cold storage will be contacted by Flexcoin and asked to verify their identity. Once identified, cold storage coins will be transferred out free of charge. Cold storage coins were held offline and not within reach of the attacker. All other users will be directed to Flexcoin's "Terms of service" located at "Flexcoin.com/118.html" a document which was agreed on, upon signing up with Flexcoin.

Flexcoin will attempt to work with law enforcement to trace the source of the hack.

Updates will be posted on twitter as soon as they become available.

176:

I had intended to reply to people. But I think it's a bit late now. Instead I'll just leave three things:
1. Cryptocurrencies with built in inflation exist. (Bitcoin itself could also change to an inflation based model, if the network agrees.)
2. On bankers and "banksters". The Australian band TISM released a song called "Greg! The Stop Sign!!". It has the classic lines: "The rich kid becomes a junkie, The poor kid an advertiser, What a tragic waste of potential, (Being a junkie's not so good either)"
3. I wish time-based local currencies were more common. However, they can't be used to buy things over the Internet.
end.

177:

Looks like Satoshi Nakamoto has been identified:
http://www.wired.com/wiredenterprise/2014/03/satoshi-nakamoto-identified/

Turns out that is his real name, and he's a 64 year old American living in California who collects model trains.

Also a libertarian, though that will come as a surprise to no one.

178:

Gold? How outre.

Plutonium, U-233 and U-235, and Np-237. Fissionables, that's the ticket.

Then no one will dare blow up their own wealth.

179:

As the Romans said, E Pluribus Uranium...

Personally, I think one of the Uranium and Plutonium isotopes with a high spontaneous fission rate is the way to go. First of, implosion devices are somewhat more difficult to build than gun type ones, second of, criticality incidents dissuade prospective goldb^w, err, transuranbugs...

180:

Looks like Satoshi Nakamoto has been identified...

Wait, wait... So the mysterious Libertarian genius evaded identification by other Libertarians and paranoid cranks by the cunning plan of...logging off the internet? After using his actual real name? And this worked for over five years?

This only raises more questions.

181:

I am skeptical that this particular Satoshi Nakamoto is the Satoshi Nakamoto who invented bitcoin. For one thing, he's denying it. For another thing, "Satoshi Nakamoto" has surfaced and is denying that he's Dorian Nakamoto. And for a third thing, if he was indeed the owner of 1.1 million BtC, it's hard to see why he would be putting up with press harassment when he could afford to hire Blackwater for personal security ...

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