re: Bitcoin is a Ponzi scheme—the Internet’s favorite currency will collapse.

I'm having a little trouble following that wall of text, but I know this much:

#1. In countries that impose capital controls like Argentina, typically the currency has an official value higher than what it's really worth, meaning that people are prevented from selling their domestic currency accounts (pesos) to try to get foreign currencies (dollars/euros/etc.).

#2. If an authorized import-export business has dollars and is already being forced to convert them into pesos at a disadvantageous exchange rate, then I'm not sure how using bitcoins as an intermediary could avoid regulators any better than any other intermediary asset would. You still have to justify all your transactions to regulators.

#3. For an ordinary person who doesn't have to report all his import-export transactions to regulatory authorities, however, bitcoins could be a way to avoid financial repression. The difficult part is building demand for the bitcoin currency within the repressed domestic economy. If there is a liquidity problem in terms of the amount of goods and services you can actually purchase that accept bitcoins, then the bitcoin exchange rate for your crap currency (peso) will be terrible.

#4. In some sense, then, the interesting part of the bitcoin system is not the currency itself, but merely the fact that anonymous trading of cash can be done on a P2P basis. A Google or Apple cannot create its own currency system for the very reason that regulators will not allow it. PayPal requires foreign bank information for you to transport currency across borders, and like credit cards, has limits on how much you can move, because it's a real business that can be targeted by regulators.

With a P2P system, however, an ordinary person with a savings account and shitty investing options in Argentina or China can convert anonymously, and then wherever they go in the world, that money will be available to them to recapture anonymously, assuming that the system is well designed.

Did you catch that recent scandal in the French government with all those government officials trying to raise taxes on millionaires fleeing the country, while at the same time keeping secret accounts in Switzerland for the purpose of tax evasion (most likely on corrupt kickback funds)? Well if they had a P2P system to transfer wealth (and possibly even make anonymous investments in equities), nobody could blow the whistle on their Swiss bank accounts, because they wouldn't even need Swiss bank accounts.

So from a theoretical monetary perspective, the currency itself is interesting because of how well its growth rate is controlled.

But from a regulatory evasion perspective, the currency itself is not at all important, but rather it is the P2P method by which accounts (of any currency) are anonymously protected and transacted with no supervisory business for regulators to target in court.

In theory, you could create a P2P system using straight dollars (or to be more technically accurate, I suppose "dollar-pegged bitcons") rather than bitcoins, and as long as there was a continual demand to buy those anonymous P2P-dollars with real bank account dollars (and as long as there are people in the world trying to hide their wealth, this continual demand should indeed exist), then there would be no problem.

Of course if the P2P system simply existed on the principle of 1-to-1 exchanges of P2P-dollars for real dollars, then there would be no profit for the creators/architects of the system, so in that sense, the logarithmic growth formula capped at a limit of 21 million is genius--albeit a major pain in the arse for users who want more reliable liquidity and storage value.

The more important thing to note, however, is that the technology currently exists to evade capital control regulators so long as you can withdraw (without being flagged or otherwise detected) the amount of cash necessary with which to buy the anonymous P2P-currency in the first place. The old "I lost money in Vegas" routine could always work.

On the flip side, anti-corruption laws meant to constrain politicians would also become more difficult, as William "Dollar Bill" Jefferson would no longer need to store his bills in a freezer.

On the scary side, we have to think about what governments will do in reaction to these developments. It seems likely that there will be moves made in some places to limit the ability of people to use physical cash, forcing them to transact all consumer transactions through the paperless economy instead, via regulated credit card companies and banks. It also seems likely that just as criminal prosecutors could bring charges against individuals for sharing too much music online via P2P services, so the same thing could happen for currency transactions via P2P services. If the government does enough online surveillance, then you might get into all these cat-and-mouse games where people would have a hard time arranging for physical meetups to trade cash for anonymous P2P-currency without running into undercover Treasury agents.

The big issue at the heart of everything here is this though: Just how secret can banks get?

Brick-and-mortar secrecy in various global financial havens has taken a huge hit in the last 20 years or so, but using P2P, secret banks could be set up on mutual co-op type models, and nobody would need a human manager beyond what was originally established by the system architect. That's the beauty here, bitcoins or no bitcoins.

quote:

---

I disagree

---

I don't care.....

to clarify, both dollars and bitcoins already have a huge underground market in argentina, and when I said people were buying bitcoins at a premium, that was a premium over the blue dollar rate (a premium over the price of bitcoin in dollars at the street price of black market dollars.

quote:

---

With a P2P system, however, an ordinary person with a savings account and shitty investing options in Argentina or China can convert anonymously, and then wherever they go in the world, that money will be available to them to recapture anonymously, assuming that the system is well designed.

---

Also, the problem with a P2P system helping people in countries like Argentina is the total lack of buyers of argentinian pesos in foreign countries, and people who are trying to avoid the inflation tax only have pesos to try to buy USD with.

quote:

---

The difficult part is building demand for the bitcoin currency within the repressed domestic economy.

---

huge demand for bitcoin already exists in argentina. They are desperate for anything that wont depreciate like their pesos do every day. The necessary catalyst would be people with access to USD that figure out how to take advantage of that desperation and start importing bitcoin in large quantities to sell at a premium on even the converted blue dollar rate in pesos.

this may help to further clarify
LINK

also, in a country like argentina, even if you could find buyers of pesos in a P2P scheme, how would you acutally get the hard currency? i'm not entirely familiar with P2P money exchANGES

quote:

---

They could micro-tax every single transaction and dispense with income, corporate, and capital gains taxes altogether

---

[poli board stuff] I am almost certain that there is zero appetite in Washington to remove every shred of progressiveness from the tax code and making it 100% regressive [/poli board stuff]

But it would definitely make life simple.

Why stop at poli board stuff when you can venture even further by going into religion stuff?

quote:

---

1 A satan* rose up against Israel, and he incited David to take a census of Israel.

2 David therefore said to Joab and to the other generals of the army, "Go, number the Israelites from Beer-sheba to Dan, and report back to me that I may know their number."

3 But Joab replied: "May the LORD increase his people a hundredfold! My lord king, are not all of them my lord’s subjects? Why does my lord seek to do this thing? Why should he bring guilt upon Israel?"

4 However, the king’s command prevailed over Joab, who departed and traversed all of Israel, and then returned to Jerusalem. ( 1 Chronicles 21:1-4)

---

quote:

---

Afterward, however, David regretted having numbered the people. David said to the LORD: "I have sinned grievously in what I have done. Take away, LORD, your servant’s guilt, for I have acted very foolishly." ( 2 Samuel 24:10)

---

quote:

---

10 Samuel delivered the message of the LORD in full to those who were asking him for a king.

11 He told them: "The governance of the king who will rule you will be as follows: He will take your sons and assign them to his chariots and horses, and they will run before his chariot.

12 He will appoint from among them his commanders of thousands and of hundreds. He will make them do his plowing and harvesting and produce his weapons of war and chariotry.

13 He will use your daughters as perfumers, cooks, and bakers.

14 He will take your best fields, vineyards, and olive groves, and give them to his servants.

15 He will tithe your crops and grape harvests to give to his officials* and his servants.

16 He will take your male and female slaves, as well as your best oxen and donkeys, and use them to do his work.

17 He will also tithe your flocks. As for you, you will become his slaves.

18 On that day you will cry out because of the king whom you have chosen, but the LORD will not answer you on that day."

19 The people, however, refused to listen to Samuel’s warning and said, "No! There must be a king over us.

20 We too must be like all the nations, with a king to rule us, lead us in warfare, and fight our battles." ( 1 Samuel 8:10-20)

---

quote:

---

16 It forced all the people, small and great, rich and poor, free and slave, to be given a stamped image on their right hands or their foreheads,

17 so that no one could buy or sell except one who had the stamped image of the beast’s name or the number that stood for its name. ( Revelation 13:16-17)

---

But why should taking a census or controlling all currency transactions be a bad thing?

Consider what was said by the late Sir John James Cowperthwaite (1915 - 2006):

quote:

---

On taxes: "Economic expansion remains the door to social progress, and I am convinced that in our circumstances low taxation can in general produce a greater growth in revenue than can tax increases."

---

quote:

---

Cowperthwaite was the Hong Kong financial secretary whose free-market convictions helped the war-weary colony grow into an economic powerhouse. Milton Friedman once explained the significance of this example: "Hong Kong's been very useful to me and it would be hard to overestimate the debt Hong Kong owes to Cowperthwaite."

Friedman first traveled to Hong Kong in 1955, when it was flooded with refugees from Communist China and life, he wrote, was "miserable" for most of its inhabitants. He returned again in 1963, when things had improved, and there he met Cowperthwaite. Asked why he forbade officials from keeping numbers even for things such as gross domestic product, Cowperthwaite told Friedman a version of what he would tell me over lunch at Hong Kong's Mandarin Hotel three decades later. "If I let them keep statistics," he said, "they can only misuse them." LINK

---

EDIT: See also Ludwig Erhard, who was director of economic administration in occupied West Germany in 1948 when he formulated plans to break free from price controls. ( LINK) FWIW, both the Deutsche Mark and the Hong Kong dollar had pegs to another currency that were altered a few times during the Bretton Woods era.

quote:

---

Bitcoins....

---

and social security (if the gubment was not running it)

quote:

---

bitcoin really doesn't fit the common definition of a Ponzi scheme at all

---

but but but Russian said it was

quote:

---

I did. Because it is.

---

IDGAF who you believe.

It's not a ponzi scheme, it's a pump and dump.