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Was that the whole point? "Chancellor on brink of second bailout for banks" is to me more germane. Not allowing the state to issue money at will is more of a co

Was that the whole point? "Chancellor on brink of second bailout for banks" is to me more germane. Not allowing the state to issue money at will is more of a core tenet. I think the a lot of the dream from there is to make it possible to electronically transfer cash. This is currently impossible with conventional money -- the best we can do is transfer deposit records electronically. To make this work we treat deposit records as surrogate cash, and take on a huge amount of systemic risk into the monetary system, which we basically backstop with unlimited government guarantees. With Bitcoin, at least in theory, we can offer an alternative system. That's not to say that a system can't arise of banks that hold bitcoin deposits and allow you to transfer these deposit record between banks, but the banks need to price in the risk of failure to meet their obligations, so hopefully we can have some mechanism of discounting bank-deposit-bitcoin vs. held-in-wallet-bitcoin. But I think this dream is dying -- there will come a day when you can only buy something with bitcoin, but only with bitcoin deposited in a bank, because it's "easier" and can be unwound, etc., because of correspondence arrangements, and then you'll have the Federal Reserve, that can basically artificially create new "bitcoin deposits", and banks will only let you withdraw 0.01BTC per week, so you'll never notice that they are insolvent, and we'll basically be right back where we started.

joshuamorton 5y ago
I'm lost, how is the government insurance of deposit records any worse than the government insurance of cash?
- andrewla 5y ago
  It's worse, not on a "debasement of the currency" basis, but on a surveillance and censorship basis. On a systemic basis it is slightly more dangerous than cash just because it reinforces the notion that bank deposits are valued at their face value and are thus a cash equivalent. But banks can fail or become insolvent, and because the money sovereign has decided that bank deposits are equivalent to cash, it is obligated to maintain that (through bailouts or other support), while at the same time banks are for-profit enterprises that are taking non-negligible risks (and sometimes explosively tail-heavy risks) to earn income based on their deposits.

joshuamorton 5y ago

I'm lost, how is the government insurance of deposit records any worse than the government insurance of cash?

andrewla 5y ago
It's worse, not on a "debasement of the currency" basis, but on a surveillance and censorship basis. On a systemic basis it is slightly more dangerous than cash just because it reinforces the notion that bank deposits are valued at their face value and are thus a cash equivalent. But banks can fail or become insolvent, and because the money sovereign has decided that bank deposits are equivalent to cash, it is obligated to maintain that (through bailouts or other support), while at the same time banks are for-profit enterprises that are taking non-negligible risks (and sometimes explosively tail-heavy risks) to earn income based on their deposits.