
Bizarre Shadowy Paper-Based Payment System Being Rolled Out Worldwide - user_235711
http://ledracapital.com/blog/2014/2/17/bitcoin-series-19-bizarre-shadowy-paper-based-payment-system-being-rolled-out-worldwide
======
hapless
Satire works when you hold _folly_ up to ridicule. Central banking is possibly
the greatest human invention since sanitation. The U.S. central banking system
ranks among the finest of its kind.

Bitcoin handles 7 transactions a second on a good day, has no reliable
institutional actors, and I can neither pay taxes nor satisfy court judgments
with it. It is an impressive proof-of-concept for decentralized trust in
cryptosystems, but it is hardly a currency.

~~~
nateabele
> _Central banking is possibly the greatest human invention since sanitation._

The greatest human invention since sanitation is that a tiny elite can control
the value of money (and money over time)?

Is that a joke? Are you joking?

Edit: Really...? Really? You know the devaluation of currency over time and
the resulting increase in the cost of goods disproportionately affects the
poor and middle class, as well as retirement savers who's interest rates can't
keep up, right?

Is that also a feature?

~~~
anigbrowl
Damn right it's a feature. Otherwise there'd be no incentive to invest, people
would just hoard assets instead of putting them to productive use. There's a
reason countries abandoned the gold standard: deflation and bank runs are
harder problems to manage than inflation.

~~~
jamoes
Don't buy into the propaganda. Bank runs only happen in fractional reserve
systems, which central banking facilitates and encourages.

Deflation isn't bad either, it encourages _saving_ , which rather than living
paycheck to paycheck as most do today.

~~~
dragontamer
Yes, because the "Centralized Bank" in 1929 caused the bank runs.

Oh wait, centralized banking didn't exist back then? Fractional Reserve
Systems didn't happen back then? And yet you have a decade of the greatest
bank-runs of US History?

And ever since the fractional reserve system was invented, there hasn't been a
national-scale bank run in the US for nearly 100 years?

~~~
andrewla
You might want to check your dates. From wikipedia[1]:

"The Federal Reserve System (also known as the Federal Reserve, and informally
as the Fed) is the central banking system of the United States. It was created
on December 23, 1913, with the enactment of the Federal Reserve Act, largely
in response to a series of financial panics, particularly a severe panic in
1907."

[1]
[http://en.wikipedia.org/wiki/Federal_Reserve_System](http://en.wikipedia.org/wiki/Federal_Reserve_System)

------
yoha
I don't think it will get popular. It needs too much infrastructure for
emission and tracking. You will need to manually find a way to get to the
right amount using such a restricted set of values [1]. Additionally, you
cannot make backups and it is very easy for lose or destroy some of these
"bills". It's a nice idea, but there is not a chance it will gain value. I
don't think it's worth investing any real money in it.

[1] [https://en.wikipedia.org/wiki/Change-
making_problem](https://en.wikipedia.org/wiki/Change-making_problem)

~~~
drcode
I think you've got it wrong. The appeal of those pieces of paper is that they
hold their value long term.

You can keep them in storage, and in 100 years they'll only have lost a mere
97% of their value.

~~~
gamblor956
Currency is not meant to hold value; it is not an asset. Currency is a means
of transacting. It needs only to hold its value in the _short_ term and change
value at a stable and predictable pace.

~~~
jamoes
Currency isn't meant to do anything, it just is. The reason you (and others)
think it's supposed to lose value is because you've been fed a set of lies
meant to deplete your wealth.

Try this thought experiment: Let's say the Federal Reserve invented two sets
of currencies in 1913: The Dollar, and The DeflataDollar. Both are protected
by Legal Tender Laws, both are acceptable for paying taxes, and both are
basically accepted everywhere. The only difference is that the supply of
Dollars increases every year (as it does now) whereas the DeflataDollar has a
constant supply. If your employer offers to pay you in either of these two
currencies, which one do you choose? Any rational actor would of course choose
to be paid in the currency that won't lose 97% of its value every hundred or
so years.

The only way to maintain an inflationary currency is to enforce its usage
through laws and taxation. Otherwise free individuals will choose something
else to trade with.

~~~
dllthomas
But your boss isn't going to offer you the same wage in each - they will be
able to offer you more Dollars than DeflataDollars _after adjusting for
inflation_ , because he needs to take into account the expected value when
he's liable to trade the currency for something else, not just the relative
values now. If _you_ want to trade for things immediately (say, buy some
groceries on the way home from work) you might very well prefer the Dollars.
If you plan on keeping your wages under your mattress for 20 years, obviously
you should prefer the DeflataDollars, but that's not what most people do.

 _" Any rational actor would of course choose to be paid in the currency that
won't lose 97% of its value every hundred or so years."_

Right, because that time horizon is _totally_ what is relevant when I'm being
paid today and turning that money into other things tomorrow.

~~~
jamoes
The point of the thought experiment, if followed through to its logical
conclusion, is that in such a world The Dollar wouldn't even exist, only the
DeflataDollar would. _No one_ would accept a currency that's losing value
(even the grocery vendor on your way home from woek) if they had the choice to
accept something that will hold its value. It doesn't matter if the rate of
value loss is slow or fast, it's inferior to something that holds its value.

~~~
dllthomas
And that point is just wrong. Anyone with a short enough time horizon would
prefer the depreciating currency, because they can get it at a discount from
those with a longer time horizon.

~~~
jamoes
> Anyone with a short enough time horizon would prefer the depreciating
> currency, because they can get it at a discount from those with a longer
> time horizon.

Exactly, the inflationary currency would be sold at a discount. And the amount
of the discount would increase over time until the value of the currency fell
to zero.

~~~
dllthomas
I think you are confusing the real and the nominative. The currency would be
sold at a _real_ discount, which means a _real_ premium on my labor if I am
exchanging it for dollars instead of DeflataDollars, so that's what I'd prefer
to accept if I will be holding it for a short time.

 _" And the amount of the discount would increase over time until the value of
the currency fell to zero."_

The exchange rate would change over time; that's unsurprising. I'm not sure
the discount (in real terms) would change if the rate of inflation was
constant. It is apparent that the value of the currency would fall _toward_
zero - that's basically our premise; it is not apparent that it would fall
_to_ zero. You'll have to support that if you want to stand by the claim.

~~~
jamoes
I agree that the rate of the discount would likely be constant over time if
the rate of the increase in money supply was also constant. If you sold your
labor for InfltaDollar's, you'd likely get paid a premium. However, when you
go to the grocery store to buy stuff with your InflataDollars, the grocer will
also expect the same discount for the InflataDollars they buy.

> It is apparent that the value of the currency would fall toward zero

I'm glad we agree on this.

> it is not apparent that it would fall to zero. You'll have to support that
> if you want to stand by the claim.

Fair enough. If graphed out, the value of the InflataDollar would only
_approach_ zero asymptotically. However, we're not just dealing with an
abstract math equation. At a certain point, the market would lose confidence
in the currency with a consistently falling value, and no one would be willing
to accept it unless forced to.

I do admit that I could be wrong - predicting the behavior of humans is always
imperfect. However, I am excited to see these experiments playing out in the
cryptocurrency space. We have Bitcoin, which has a fixed supply of currency,
and we also have Freicoin, a cryptocurrenty with demurrage (a form of currency
devaluation) built into it. It will be interesting to see the futures these
currencies have.

~~~
notahacker
Given the existence of a choice between deflating and a hypothetical
alternative of a universally accepted stable risk-free store of value, it
would be rational to prefer to receive the latter. It is still however, in my
rational interest to prefer the latter to not exist at all. Being one of the
large majority of people who aren't the unproductive uber-rich, I prefer that
those that have far more dollars than me are more inclined to circulate them,
creating far more opportunity for me to grow my share of national wealth (and
absolute national wealth) than would exist if dollars were to be spent only
when absolutely necessary. The corollary of your argument is that if we frame
it the other way round, with StableDollar and other non-depreciating capital
holders tending to hold more bargaining power than the general labour supply,
they will be able to get away with paying only InflataDollars to the point
where the level of StableDollars actually circulating in the economy will tend
towards zero asymptotically...

In our actual system the ability to deposit InflataDollars into accounts with
fixed risk-free positive returns (backed by expected and potential supplies of
InflataDollars), the government keeping inflation low, and the government
requiring you to pay tax on 30-40% of your income solely in InflataDollars
ensures the demand for InflataDollars will never approach zero. In fact, it's
_much less likely to reach zero than the demand for Bitcoins, Freicoins or
tulip bulbs, none of which anybody is obliged to use in any circumstances_ (at
least not until Bitcoin-denominated debts become widespread and readily
enforceable. If I wanted to design a cryptocurrency I'd focus on that aspect)

~~~
dllthomas
You are obliged to use bitcoins if you want to put something in the blockchain
(and no one will do it without a transaction fee). If you aren't using
bitcoins otherwise, there is not presently any reason to put something in the
blockchain. That could potentially change.

I'm not sure whether or not that is meaningfully different from "you are
obliged to use tulip bulbs if you want to grow. tulips." I am inclined to
think that it could be.

------
Tloewald
The article is idiotic and disingenuous. Paper money didn't attempt to replace
coin in one fell swoop. Paper money evolved from letters of credit which make
perfect sense, and bitcoin fundamentally relies on similar concepts anyway.

You can't buy something online by just anonymously transmitting credits into
an account -- who gave us the money? what do they want? You fill in an order
form, a bunch of stuff happens, you get a receipt and a product and money gets
transferred at some point. Very little of that is the currency transaction.
You needed to generate a letter that said I want X and I'll pay you Y, then
you paid Y and sent confirmation of the money transfer, and so on.

The bitcoin bulls think that Credit Cards are a terrible way to buy things
because they charge too much for what they do (and their security sucks). This
may be true, but bitcoin is only solving the easiest part of the problem.
Banks can already transfer money around cheaply and securely. Indeed even
market transactions are so fast and inexpensive that high speed trading is now
a huge economic force.

The fact is that credit cards (a) let you buy stuff on credit, (b) provide
transactional support allowing commerce to proceed smoothly, and (c) already
work. A credit card is merely automated checking with overdrafts, which is a
direct descendant of the letter of credit (from which cash evolved), which is
in fact a more fundamental method of trading than barter. (Tracking people's
accounts is the reason writing was invented.)

------
leobelle
Ever since POS hacks on Target and other retailers I've completely switched to
cash only. Not only can't you be tracked, something I'm not sure I care about,
but it reduces the chances of somebody stealing your card info.

And I only use wells fargo ATMs, because they have a nice green glowing card
input, so you know nobody put a malicious card scanner on the ATM.

It's a complete reversal from a few years ago where I wouldn't carry cash and
wouldn't go anywhere that was cash only. Going cash only also reduces the fees
for stores where you buy things.

Cash is the way to go, despite all of our technology.

~~~
hahainternet
Sweet, now you have no insurance and you carry about significant quantities of
money I'm sure you're much safer.

~~~
leobelle
Insurance against what? I don't carry boatloads of cash on me.

~~~
hahainternet
Insurance against theft, fraud, any transaction based deception you are now
unprotected against. Once you have handed over cash, it'll take a herculean
effort to get that back.

On the other hand, when someone mugged me for my card, I cancelled it a few
minutes later and had a replacement within 2 days. I lost nothing but my pride
and my wallet.

~~~
polymatter
But your risk exposure is much much higher. When a mugger steals $70 from me,
my maximum exposure is $70. There is no way that mugger can use those bills to
extract any more money from me or as a launchpad for fraud. When a mugger
steals my card (and then commits a little fraud) my maximum exposure is my
bank account + overdraft + other accounts I have with the same bank + whatever
loans they could get.

~~~
gtirloni
_When a mugger steals my card (and then commits a little fraud) my maximum
exposure is my bank account + overdraft + other accounts I have with the same
bank + whatever loans they could get_

Your practical maximum exposure is zero, if you follow the correct process.
Call your bank and report the stolen card. Any transactions will be undone and
the bank will take the hit, in the name of keeping the public's faith in the
banking system. This is an ordinary business day for the bank.

------
kordless
This article is entertaining, interesting and relevant. Humans are
exceptionally good at rationalizing their biases, especially if they involve
trust, and interest is required to alter those biases in a positive way. The
biggest challenge for cryptocurrencies today is raising interest and trust in
the general population. We can best effect that by working hard to raise
interest in cryptocurrencies in a positive way.

This is more commonly known as "marketing".

~~~
at-fates-hands
>> The biggest challenge for cryptocurrencies today is raising interest and
trust in the general population.

I would actually say its getting the general public informed. 75% of the US
population are aging baby boomers. They can barely work an iphone, how the
heck do you think they're ever going to accept cryptocurrency? Even with a ton
of marketing, this is something that is completely foreign to 85% of the
general population.

~~~
k-mcgrady
>> "I would actually say its getting the general public informed. 75% of the
US population are aging baby boomers. They can barely work an iphone, how the
heck do you think they're ever going to accept cryptocurrency? Even with a ton
of marketing, this is something that is completely foreign to 85% of the
general population."

You're saying 75% of the US population cannot work an iPhone? Or 75% are baby
boomers?? Just so you're more informed next time you make up stats, less than
15% of the US population would be considered baby boomers.

Source:
[http://quickfacts.census.gov/qfd/states/00000.html](http://quickfacts.census.gov/qfd/states/00000.html)
and [http://en.wikipedia.org/wiki/Baby-
Boom_Generation](http://en.wikipedia.org/wiki/Baby-Boom_Generation)

~~~
at-fates-hands
"Baby Boomers make up 35% of the American adult population (Scarborough)."

"By 2015, those aged 50 and older will represent 45% of the U.S. population
(AARP)."

[http://www.immersionactive.com/resources/50-plus-facts-
and-f...](http://www.immersionactive.com/resources/50-plus-facts-and-fiction/)

Ok so not exactly 75%, but I was a lot closer than the 15% you mentioned.

~~~
k-mcgrady
If we take your first figure of 35% I am closer. If we take your second figure
of 45% we are each 30% off. So yet again - stop making things up, you are not
a lot closer.

Also "By 2015, those aged 50 and older..." Some of those people wouldn't be
considered baby boomers as that generation ends in 1964.

------
acconrad
My issue with fluff pieces like this is that there are plenty of established
tools in our lives that would not be available if they started out today.
Acetaminophen (or Tylenol by it's brand name) is often touted as a drug that
would never pass modern FDA regulations if it were introduced today due to
it's issues with liver toxicity and link to Reye's Syndrome.

We make products and services with what we have available at the time, that
doesn't necessarily mean that they are an indefinite solution, nor does it
mean that we are going to hold our archaic solutions to the same standard we
do with our new and improved solutions.

~~~
hapless
Tylenol should probably not be available over the counter. It has a narrow
therapeutic index and safer, equally effective alternatives.

~~~
Consultant32452
Conversely: everything should be available over the counter. If someone wants
to kill themselves by destroying their liver with acetaminophen, that's their
business.

~~~
hapless
If _everything_ were available over the counter, the presumption of safety
would disappear, and we wouldn't have a problem.

As it is, we have a two tier system. Consumers are trained that OTC drugs are
so safe they barely have to glance at the instructions. APAP is vastly more
dangerous than its peers on the OTC shelf, and consumers are placed at risk.

------
bertil
[This is satyre, imagining cash introduced now, and mocking BitCoin's critics.
Some ring true, some miss the two-sided market issues behind adopting new
payment forms.]

To be honest, I’ve been in Nordic countries for a year (where all transaction
are card-based, and there is no minimum amount for payment) and that situation
rung surprisingly true — especially after yesterday, when I was facing a coat
valet who was expecting a ten crown in cash.

~~~
busterarm
I had amusing experiences in Denmark where I was forced to walk around with
about 10,000 kroner because American banks and lending institutions are too
lazy and cheap to implement Chip-and-Pin systems. Also almost nobody takes
American Express (I don't blame them though).

Anyway, folks' reactions to that much cash were pretty much "are you a drug
dealer?", which was pretty funny.

At least I _always_ had cash for the Pølsevogn. :)

I had similar happen to me in Iceland but they're slightly more cash and
"Yankee Plastic"-friendly.

~~~
hapless
The U.S. will be implementing chip-and-pin in 2015.

~~~
busterarm
I know. It's about damned time.

------
williamcotton
Our currently existing currencies evolved over time. Central banking and fiat
currency were institutions delivered by liberal democracies by the process of
public debate.

They were not hair-brained ideas established by anonymous individuals engaged
in private debate outside of the forums of democracy.

Look, I know all of you are very excited about these experimental economic and
political systems, but please realize that the existing world that you are
"suffering" under was mainly developed as a slow process of evolution.

Most extreme revolutionary ideas take a long time to work their way in to the
existing societal structures and way of life. When they're quickly forced on
to people, all fucking hell breaks loose.

So for fucks sake, get some balance and control your zealotry, people!

And read some history books! The future is built from the past no matter how
long or hard of a process that seems to be. Go with the flow!

Engage with other people. Engage with the existing institutions. Even if it is
a better idea, there are billions of people who rely on the current system in
ways that you can't predict.

~~~
alexmat
"The future is built from the past no matter how long or hard of a process
that seems to be."

Observation of the past does not allow one to accurately predict the future. I
recommend Karl Popper's classic, "The Poverty of Historicism", which expounds
on the topic.

~~~
williamcotton
I'm not talking about predicting the future. I'm talking about the fact that
you can't escape the past.

And you mean the same book that Popper dedicated "In memory of the countless
men and women of all creeds or nations or races who fell victim to the fascist
and communist belief in Inexorable Laws of Historical Destiny"?

Much like how everyone is trumpeting the "inexorable laws of historical
destiny" of Bitcoin? Hmm?

Thank you for reminding me of this book, BTW, I had sort of forgotten about
it! Unfortunately you seem to have misapplied its lessons but it is actually
basically in support of the same sort of arguments I've been making about
Bitcoin.

------
ashray
Amazing post! I wonder why everyone is called Mike Smith in the article though
? Mike Smith - VP of this, Mike Smith - a tourist, Mike Smith - etc. ?

Something else that wasn't covered is that cash is also dirty and carries
grime and infections. Ideally you should wash your hands before you eat if you
handle any cash. (this is less of a problem with laminated/plastic notes like
the CAD or EUR)

Imagine a super virus propagating and killing people through cash. Ouch!

~~~
hapless
There are few, if any, documented cases of illness being transmitted by cash.

This is why regulation does not require food handlers to take special
precautions while handling cash.

~~~
redblacktree
A quick google turned up this document[1], which claims that food handlers
should wash their hands, "after handling money or a cash register."

[http://www.healthandwelfare.idaho.gov/Portals/0/Health/FoodP...](http://www.healthandwelfare.idaho.gov/Portals/0/Health/FoodProtection/Employees%20Guide%20to%20Food%20Safety.pdf)

------
beobab
Sounds like a great idea. I'd love to get some of this "cash" stuff everyone
keeps talking about.

~~~
almosnow
Yeah, sounds like you could build a really cool civilization over that, I'm
totally in. (Not sarcastic at all, I definitely enjoy the world and how it
works.)

------
keithgabryelski
go home bitcoin -- you're drunk.

bank notes are a very simple system, so simple it has been used for over a
thousand years.

~~~
shitgoose
_Gold_ has been around for over a thousand years. Bank notes that cannot be
exchanged for gold at fixed rate are recent invention (1971).

~~~
lmm
Gold was used to back currency for less than a hundred years (except in
Britain). Pre-1800 banknotes were never pegged to gold.

(If you were talking about silver you might have a leg to stand on).

~~~
redblacktree
But didn't folks primarily use hard currency prior to 1800? Wouldn't that
obviate the need for "backing?"

------
teddyh
I Can Barely Draw webcomic has recently had a number of comincs in the same
vein as this, starting here:

[http://www.icanbarelydraw.com/comic/2565](http://www.icanbarelydraw.com/comic/2565)

------
talmir
This reminded me of the fact that I havent handled, or even touched, real
paper money for at least a year now. Here in Iceland paper currencly is slowly
being phased out, and has been for a few years.

------
raverbashing
This is the premise behind the subreddit r/ActualMoney

Satire is an interesting way to analyze things, especially in this case.

~~~
Marazan
No, the actual money subreddit is taking the piss out of Bitcoin.

------
the_watcher
Obviously hyperbolic and not a perfect comparison, but gets enough right to be
pretty damn clever. The "hardware wallets" security flaws and anonymity
facilitating criminals are particularly enjoyable.

The more policy-oriented economic points aren't nearly as strong, but overall,
I thoroughly enjoyed it.

Just to be clear: I like Bitcoin a lot, but I don't think it will ever replace
national currencies. I just enjoy pointing out the hypocrisy of a lot of
bitcoin detractors.

------
raintrees
I don't know if anyone remembers Bob Newhart standup shtik, but this article
(abridged/down-sized) would fit right in there...

------
alayne
Bitcoins (and others) aren't backed by a government. One of the major
exchanges used to trade Magic the Gathering cards (You know, for kids!). Bills
also have serial numbers that provide some amount of traceability, at least
between Federal Reserve branches and banks.

~~~
shiftpgdn
A. MtGox never traded magic the gathering cards, this is a myth. The domain
might have been bought for that but it was never a trading platform for magic
cards.

B. Magic the Gathering isn't just for kids! It's actually quite fun.

~~~
kbenson
_B. Magic the Gathering isn 't just for kids! It's actually quite fun._

I'm pretty sure the "You know, for kids!" is a Hudsucker Proxy reference.

------
justinzollars
I'll take any unwanted bills. :)

------
jcslzr
they say that is why they sink the Titanic, on board was all the powerful
people that opposed the creation of the Fed, (I personally don't think an
iceberg can do that), but anyway one year later the Fed was born.

~~~
MartinCron
_I personally don 't think an iceberg can do that_

Oppose the creation of the Fed? Icebergs are very persuasive. You should stop
listening to whatever conspiracy nonsense you're listening to and go talk with
an iceberg instead.

------
Sheepshow
What a circle jerk.

------
Eleutheria
The good.

Money is good, in any form. Banks are good, they help allocate resources in a
capitalist economy. Central banks are good, they can help other banks in need.

The bad.

Fractional reserve banking is robbery. Inflation is robbery. Printing money is
robbery.

The ugly.

Government, the fed, banksters, they are a maffia, a band of thugs writ large.

