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>Except that there are dozens of alternative currencies in use in the USA right now... Right. They're all little joke currencies that don't affect anything.

by tsotha 13y ago

>Except that there are dozens of alternative currencies in use in the USA right now... Right. They're all little joke currencies that don't affect anything. "Aww, that's cute. Your town trades tickets redeemable for an hour of work." If any of them were adopted by a nontrivial number of people or if people started using bitcoins or euros or yen in significant quantities the government would definitely get involved in a very hostile fashion. >Well let's put it this way: what currency can you use to pay your taxes? Now, if you are a business that actually pays its taxes (as most do), what currency will you need to do business in? Doesn't matter. If people don't actually hold dollars and just change their bitcoins into dollars when they need to pay taxes the government doesn't gain anything by printing dollars. It just means every year when I go to pay my taxes I get many more dollars for my bitcoins than I did the previous year. >USD is backed by the law: tax laws, debt laws, torts, fines, fees, etc. Right. Nothing, in other words. The same was true for the Zimbabwe dollar until they gave up. It just means people will convert whatever they're holding into dollars when they need to deal with the government. >First of all, there is basically no chance of Bitcoin supplanting the US dollar, for the reasons outlined above. You haven't made your case for that at all. If the CPI goes back to what it was, say, in the Carter years (and it will), Bitcoins could supplant the dollar very quickly. The biggest obstacle to adoption is the fact that you can't hold a bitcoin in your hand. But if that mental block was overcome people could switch over very quickly. Personally, I doubt it will happen because people will be reluctant to trust a virtual currency, and a few rumors about a mathematical flaw in the algorithm is all it would take to shatter any built up trust. But it's not impossible. >That being said, even if by some miracle Bitcoin supplanted the dollar, the government would not go bankrupt, it would just start using Bitcoin. The switch from the gold standard did not bankrupt the government; why would a switch from fiat currency to Bitcoin bankrupt the government? The switch from the gold standard didn't bankrupt the government, but a switch to the gold standard certainly would. You realize, do you not, that QE is nothing more than a sophisticated way to print money? The government could not pay the interest on the debt without the fed creating money and using bond purchases to drive down treasury rates. >Despite the ramblings of certain libertarians and anarchists, this is not Zimbabwe, we are not bankrupt, and we are not expanding the money supply to avoid bankruptcy. This is just wrong (except the part about us not being Zimbabwe). That's exactly what we're doing. The only reason we're getting away with it is the monetary contraction that occurred when the housing bubble collapsed. But that contraction is pretty much over. Balancing the budget without printing money at this point would require politically impossible decisions.

betterunix 13y ago
"They're all little joke currencies that don't affect anything." ...kind of like Bitcoin. A couple thousand businesses willing to take Bitcoin via a payment processor? That's not even a blip on the radar of the financial world. You might as well be talking about Billy Bob's Hardware Depot, with over ten thousand customers served in 5 counties. "If people don't actually hold dollars and just change their bitcoins into dollars when they need to pay taxes..." Sounds like businesses will find a way to save money (and thus be more competitive) by avoiding the cost of converting between currencies and demanding USD up front (or penalizing customers who use Bitcoin, as many businesses already do with customers who use credit cards). There is also the matter of legal tender law: an American business cannot (legally) refuse to take payment in USD, but nobody is obligated to accept Bitcoin. It would take a breakdown of law enforcement in the USA, at a fundamental level, to make the situation you described possible. ">USD is backed by the law: tax laws, debt laws, torts, fines, fees, etc. Right. Nothing, in other words. The same was true for the Zimbabwe dollar until they gave up." If you think the law amounts to "nothing," then go ahead and ignore it. Don't bother with your taxes. Refuse to take USD payments and demand only Bitcoin. Put your money where your mouth is. Take a brief look at what happened to the Zimbabwe dollar in 2008. Hyperinflation was certainly the primary problem, but the last step in the failure of the currency was the government's inability to enforce the law. People were illegally conducting business using foreign currency, and the government was unable to stop them. People ignored price freezes and illegally adjusted the prices of goods throughout the day. Ultimately, the government "gave up" and repealed laws that people were not bothering to follow. You would have to be delusional to think that the US is even remotely near such a situation, or to even think that there are signs that such a situation will occur any time soon. "The biggest obstacle to adoption is the fact that you can't hold a bitcoin in your hand. But if that mental block was overcome people could switch over very quickly." That is not just a mental block. Requiring an Internet connection for every transaction raises the price of transactions, and needlessly so when we have a widely accepted way to make payments offline. No, ignoring confirmations is not a solution here. The trucker who delivered my car would not take a check, and for the same reason he would not have accepted a 0-confirmation Bitcoin payment; he wanted cash, because he could count it and could count on being able to spend it the next day. "The government could not pay the interest on the debt without the fed creating money" Or, you know, that other things: taxes. We may have a large debt, but we also have historically low tax rates. "That's exactly what we're doing. The only reason we're getting away with it is the monetary contraction that occurred when the housing bubble collapsed" Hm, you might be on to something there. Like, maybe the currency was issued to prevent the money supply from contracting. That would just be crazy, though; who ever heard of economists wanting to prevent deflation? "Balancing the budget without printing money at this point would require politically impossible decisions" Yeah, like across-the-board budget cuts. Not that we are likely to see anything resembling that: https://en.wikipedia.org/wiki/Budget_Control_Act_of_2011 https://en.wikipedia.org/wiki/Budget_Control_Act_of_2011

by tsotha 13y ago

betterunix 13y ago

"They're all little joke currencies that don't affect anything." ...kind of like Bitcoin. A couple thousand businesses willing to take Bitcoin via a payment processor? That's not even a blip on the radar of the financial world. You might as well be talking about Billy Bob's Hardware Depot, with over ten thousand customers served in 5 counties. "If people don't actually hold dollars and just change their bitcoins into dollars when they need to pay taxes..." Sounds like businesses will find a way to save money (and thus be more competitive) by avoiding the cost of converting between currencies and demanding USD up front (or penalizing customers who use Bitcoin, as many businesses already do with customers who use credit cards). There is also the matter of legal tender law: an American business cannot (legally) refuse to take payment in USD, but nobody is obligated to accept Bitcoin. It would take a breakdown of law enforcement in the USA, at a fundamental level, to make the situation you described possible. ">USD is backed by the law: tax laws, debt laws, torts, fines, fees, etc. Right. Nothing, in other words. The same was true for the Zimbabwe dollar until they gave up." If you think the law amounts to "nothing," then go ahead and ignore it. Don't bother with your taxes. Refuse to take USD payments and demand only Bitcoin. Put your money where your mouth is. Take a brief look at what happened to the Zimbabwe dollar in 2008. Hyperinflation was certainly the primary problem, but the last step in the failure of the currency was the government's inability to enforce the law. People were illegally conducting business using foreign currency, and the government was unable to stop them. People ignored price freezes and illegally adjusted the prices of goods throughout the day. Ultimately, the government "gave up" and repealed laws that people were not bothering to follow. You would have to be delusional to think that the US is even remotely near such a situation, or to even think that there are signs that such a situation will occur any time soon. "The biggest obstacle to adoption is the fact that you can't hold a bitcoin in your hand. But if that mental block was overcome people could switch over very quickly." That is not just a mental block. Requiring an Internet connection for every transaction raises the price of transactions, and needlessly so when we have a widely accepted way to make payments offline. No, ignoring confirmations is not a solution here. The trucker who delivered my car would not take a check, and for the same reason he would not have accepted a 0-confirmation Bitcoin payment; he wanted cash, because he could count it and could count on being able to spend it the next day. "The government could not pay the interest on the debt without the fed creating money" Or, you know, that other things: taxes. We may have a large debt, but we also have historically low tax rates. "That's exactly what we're doing. The only reason we're getting away with it is the monetary contraction that occurred when the housing bubble collapsed" Hm, you might be on to something there. Like, maybe the currency was issued to prevent the money supply from contracting. That would just be crazy, though; who ever heard of economists wanting to prevent deflation? "Balancing the budget without printing money at this point would require politically impossible decisions" Yeah, like across-the-board budget cuts. Not that we are likely to see anything resembling that: https://en.wikipedia.org/wiki/Budget_Control_Act_of_2011 https://en.wikipedia.org/wiki/Budget_Control_Act_of_2011