
Inside the Bitcoin advocates’ closed-door meeting with federal regulators - jnazario
http://www.washingtonpost.com/blogs/the-switch/wp/2013/08/27/inside-the-bitcoin-advocates-closed-door-meeting-with-federal-regulators/
======
lmg643
I love the phrase "excessive regulation could drive innovation in virtual
currencies overseas". Depending on your view of the US dollar, the US is
already the world leader in virtual currencies - trillions of dollars created
out of thin air by the federal reserve.

bitcoin deserves a better classification - "digital gold" \- anonymous and
resistant to inflation as is gold, but portable and easily divisible for use
as a medium of exchange. corrects some key faults of gold, although secure
long-term storage is a different kind of challenge.

since all inflation is created by the US government as an unofficial policy
(or official, depending on how you look at it) to fund an ongoing operating
deficit, I can't see them taking lightly to any serious challenger to currency
transactions.

the pricing of oil (among other things) in US dollars around the world is a
major pillar of US economic strength and the government probably will tolerate
bitcoin as long as it is a diversion, but will get serious if it grows, and
try to ban it on money laundering grounds (because USD clearly can never be
used for money laundering, right?).

i also think the "innovation in virtual currencies" is an interesting claim
because there are plenty of other non-US virtual currencies to use for
transactions - yuan, rubles, etc. they just don't have the gold-like aspects
of bitcoin.

~~~
ajross
> _since all inflation is created by the US government_

... no. You're confusing currency with money. Governments create the former.
The latter (which is a _much larger number_ ) is the result of any lending (be
it by the Fed or a private bank), and "inflation" is a virtually inescapable
side effect. Any macroeconomics textbook would have told you this. Even a
google search for "how banks create money" should do pretty well.

But you can continue feeding your macroeconomic intuition with stuff you read
on WND or see on Fox if you like.

~~~
richcollins
It depends on whether you consider the fed a part of the government I suppose.

~~~
ajross
It really doesn't. Even including the bailout loans (and the argument about
whether they constitute "loans" per se, yada yada), the overwhelming majority
of lending is done by private banks. And that's where money comes from.

The idea that inflation happens because of "printing money" is a fiction. And
a harmful one, IMHO, because it gets used as above as an argument to support
some pretty ridiculous policies.

~~~
ha-ha-ha
Well, one can say that a bank giving a loan in a fractional reserve banking
system is printing money.

~~~
nhaehnle
Yes, though ajross's point was about the causality of things. Printing money
by itself does not cause inflation, no matter who does the printing.

Inflation is a matter of supply and demand. As long as there is excess supply,
one can buy the supply with newly created money without raising prices. That's
supply and demand 101.

The only tricky part is figuring out how much money can be safely printed.
Central planning tends to be bad at this (which is why so-called military
Keynesianism is a bad idea from an economics point of view, even if you don't
care about pacifism).

The trick is to figure out a decentralized and automatic approach. That is, an
approach that automatically increases the amount of money creation when
there's slack in the economy, and automatically scales back when the economy
is operating at full capacity.

~~~
unclebucknasty
> _As long as there is excess supply, one can buy the supply with newly
> created money without raising prices_

I don't understand how this works in the case of, say, quantitative easing,
which released tons of new cash into the economy, while nothing else had
fundamentally changed with regard to supply in the economy. By your
definition, wouldn't that create rampant inflation?

Or, are you saying that much of that money ended up in the equities market vs.
"in the economy" as fresh demand, which allowed supply/demand equlibrium to
remain virtually unchanged?

~~~
nhaehnle
Exactly: Quantitative easing did not release new cash into _the economy_. It
only swapped assets that banks held (such as treasuries) for central bank
money (aka "reserves"). This is why you saw some asset price increases (which
is the stated goal of QE), but almost no effects in the real economy (which is
the other stated, but unrealistic, goal of QE).

------
fiatmoney
The feds should love bitcoin - it stores a record of every transaction ever
made. It's an auditor's dream.

~~~
mpyne
Indeed, and thanks to non-repudiation they simply have to verify _once_ that a
given wallet belongs to a certain someone and they've solved that many more
layers of that fully-documented transaction history.

------
shtylman
"drives jobs away" please, there are way more things that drive jobs away

"3$ to get money out of an ATM" Maybe you should 1) get a bank that refunds
the fee 2) consider that there are costs associated with the physical ATM

~~~
zanny
Bitcoin removes the physical costs. Instant competitive advantage. So the
proponent argument saying atms are outdated and obsolete, thus meaning they
are a drain on the economy to maintain rather than productive, still holds.

------
ccarter84
Bitcoin is only as anonymous as the blockchain allows. The sooner LE & bitcoin
exchangers unify forces and convince Congress to act on a national level (thus
removing the regulatory uncertainty), the sooner BTC will be allowed by
existing players to be adapted into mainstream financial system.

The shifting of BTC abroad aspect is a problem from the LE perspective,
because it's akin to everything 'going dark.' Yes there are downsides to more
regulation if you're looking for truly being off the grid, or are mainly a
user of silk road --- but it will also allow the system to live in the open,
much like the recent rulings from FinCEN equating BTC exchangers to MSB's and
pulling them in to the existing framework that way.

------
svasan
As mentioned elsewhere here, Modern Money Mechanics booklet published by the
Federal Reserve Bank of Chicago is a very good read. It explains the concept
of "money" at a very fundamental level. The booklet talks about how and where
money is "created", who are the players involved, and a working example of how
these things happen.

Search for "Modern Money Mechanics" by FRB Chicago.

edit - Sorry, just realized this comment might be off-topic.

------
ballard
Bitcoin currently has a tiny market cap (1.3 B USD) compared to USD (~6 T).
[1] Average BTC transaction volume is around $35 M USD/day or roughly $12 B
USD/year. [2] This is comparable to stock market capitalization (57.5 T) to
USD (6 T) currency ratio (10x).

If you were a mega kingpin, you'd be forced to use other means of cash washing
(art, metals, jewels, etc.). There isn't enough volume in BTC to wash great
amounts of money unless something more clever were used (such as using BTC to
cover escrow/insurance, but not normally transacted). (Are there black/grey
market insurance carriers? I'm guessing there are with %75 confidence.)

[1] [http://bitcoincharts.com/bitcoin/](http://bitcoincharts.com/bitcoin/)

[2] [http://blockchain.info/charts/estimated-transaction-
volume-u...](http://blockchain.info/charts/estimated-transaction-volume-
usd?timespan=180days&showDataPoints=false&daysAverageString=1&show_header=true&scale=0&address=)

------
seanalltogether
I found it interesting that last night over the course of an hour the value of
bitcoin jumped up by $10. Clearly some people with a lot of money to invest
assumed the meeting had a positive outcome.

~~~
ISL
If you look at "market depth" plots, you'll see that a small desire to buy or
sell BTC has a disproportionate impact on the market relative to market
capitalization. Lots of people are sitting on bitcoin, so the few who make
trades on any given day have an amplified effect on price.

Right now, ~1 million USD can shift the price of BTC by ~$5. That $5 shift
changes the effective market capitalization by ~$57 million. You'll know
things are stable when a million dollar purchase of BTC shifts the market cap
by ~$1 million.

~~~
nhaehnle
_You 'll know things are stable when a million dollar purchase of BTC shifts
the market cap by ~$1 million._

In all fairness, this is nothing special about BTC. For every financial asset
ever, an X$ amount of transactions shifts the market capitalization by more
than X$.

That's what makes those "X billion $ value destroyed by stock market movement"
stories so ridiculous.

It would be interesting though to see a comparison of BTC to a range of
different stocks and other assets.

------
gambler
_< img intent in-standard-src="med.png" in-mobile-src="small.png" />_

Why not <img intent src="med.png" in-mobile-src="small.png" />?

