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.
How did you come to that conclusion? Is this a common viewpoint?
EDIT: I am genuinely curious. It doesn't strike me as a great invention, but I could be wrong. I'd love to be convinced otherwise, for example by reasoned arguments of how things were before central banking and why things were so much better after and compared to all other alternatives, as well as what sets U.S. central banking system apart from the rest of the central banking systems in the world. Do you have any links to this type of reasoning?
I am hardly an expert. But I (apparently) know a lot more than the average Joe. Seeing the rash of "end the fed" madness on the internet makes me very sad.
In other words, I think the arguments against why Bitcoin is needed in the US are interesting and all, but ultimately miss the point (in my opinion). As someone who came from a country where the central banks were anything but amazing, and there is essentially a 5/10 year cycle that inevitably leads to hyperinflation, I can attest that these problems are in fact very real -- not scary stories told by crazy libertarians -- even if they don't happen to take place in the richest nations on earth. As such, Bitcoin provides a very interesting new hope to solving these problems in these areas, as opposed to yet another unfair loan from the IMF or exploitative foreign investments.
It's kind of like laughing at how silly filtering water bottles are because we have great water sanitation in America, while ignoring that this is a real issue in Africa.
Germany 1930s - hyperinflation; Argentina 1990s - hyperinflation; USA 2010s - quantitative easing.
These can also be real problems even for the richest nations.
As you correctly mention - Iraq  & Libya  were essentially currency invasions and NOT oil invasions. Millions of innocent lives lost to keep the USD propped up. Wars that would make no sense under BTC.
The oil thing is nonsense. All oil sales are enumerated in USD for historical reasons only. Dictators who face embargo by the U.S. would rather sell oil for other currencies in order to evade the embargoes.
Iran is trying to sell oil on their own private oil bourse right now. It is an operating concern, today, in 2014. They are perfectly free to sell oil for other currencies, but they are not finding a lot of buyers.
And then those tokens become valuable themselves ?
I thought that explanation was quite interesting but was unsure of its value in describing the real world. BUT THEN, I remember the description in Zinns _Peoples History of the United States_ wherein he describes exactly that scenario:
Columbus wanted gold out of Haiti. There was none. They told the natives to get it anyway, and gave them copper necklaces to indicate that they had fulfilled their gold tribute. "Indians found without a copper token had their hands cut off and bled to death."
So ... to whatever degree this picture of money is accurate, and it appears that it is more accurate than I thought after simply reading "Debt", and to whatever degree central banking is a continuation of that process ... I would have to look askance at central banking, yes ?
 http://www.thirdworldtraveler.com/Zinn/Columbus_PeoplesHx.ht... (see paragraph that begins "But too many of the slaves died in captivity")
"The greater the need to improvise the more democratic the cooperation [within companies] tends to become. Inventors have always understood this, start-up capitalists frequently figure it out, and computer engineers have recently rediscovered the principle … Apple Computers is a famous example: it was founded by (mostly Republican) computer engineers who broke from IBM in Silicon Valley in the 1980s, forming little democratic circles of twenty to forty people with their laptops in each other’s garages."
I wouldn't trust any part of anything in the book.
Learning other stuff in the process?
Gaining a better idea of what the thing you study entails, even if you don't understand it fully yet?
What I mean is, you can study something even if you know that you won't understand it at the end of your studies. There's even stuff that you can have a full career in and still not understand completely, like Quantum Mechanics.
It's not a guarantee that by studying something you'll understand it, but learning more about it can be valuable in itself.
For example I can study some X technique in a language, e.g Monads, and know when to apply it and what it does, and be quite productive with it, even if I don't yet understand it (or never get to understanding type theory).
Unless of course, you're challenging that informal fallacies even exist.
> I came to this conclusion after spending a significant fraction of my too-short lifespan studying how money works.
Alright, I'll bite. Please educate me by answering these questions:
1) How are central banks "ranked"? What makes one better
2) What is the benefit of a central bank?
3) What makes fiat currency valuable?
4) Why is governments' ability to print limitless
amounts of fiat currency not a problem
with regard to its value?
5) .. and if it is, why are we all using fiat currency anyway?
1. Central banks are ranked on two measures: a.) How independent are they? Are they easily swayed by politicians? b.) How well do they meet their mandates? The U.S. Fed is universally well-regarded in terms of its independence. It does less well on its "dual mandate."
2. Central banking systems make cash and checking possible. Without central banking, your bank-denominated money (whether "checking" or cash) is valued only to the extent that a third party trusts your bank. Your twenty dollar bill printed in Philadelphia becomes valueless in New York, 100 miles away. Fixing this problem makes business transactions, particularly lending, easier and more efficient.
3. Broadly, fiat currency is valuable because other people deem it to be so. Specifically, even if no other person on earth wants it, the IRS and the courts will accept it. Being able to pay my taxes and satisfy court judgments against me in fiat currency places a floor on its value. (It is interesting to observe fiat systems where you de facto can't pay your taxes in the fiat currency: north korea, cuba, zimbabwe, etc)
4. Ability is not action. It is a problem when and if they do happen to do so. (returning to the ranking question, the central bank that printed limitless amounts of currency would be very poorly ranked, since they would fail to meet inflation mandates) Secondly, we want the money supply to rise and fall with the economy. It is very important that the printing of money is not limited artificially, or else we encounter liquidity crises, bank runs, etc. The ancient demons of inflation and deflation.
5. Because the prior standard for currency, precious metal, was dangerously uncontrollable. The very word "dollar" comes from a place in Germany where silver was unexpectedly found, causing an economic crisis across Europe as cheap silver flooded the market.
> 1. Central banks are ranked on two measures: a.) How independent are they?
Central banks are never independent, because they're extremely central in governments' control of their money supplies.
> Are they easily swayed by politicians?
Of course they are. They exist to serve politicians (especially the shadowy figures behind the scenes), and massive financial corporations with first access to "free" (0% interest) money, with which to buy real, productive assets.
> b.) How well do they meet their mandates? The U.S. Fed is universally well-regarded in terms of its independence.
Universally, huh? We must live in different universes. Sure, it's supposedly a "private" entity, but obviously married to the government, buying treasuries like there's no tomorrow.
> It does less well on its "dual mandate."
The Fed's "dual mandate" is supposedly to control interest rates and employment. Too bad it can't create jobs - the best it can do is stop fucking with the economy and let businesses create jobs. Interest rates have been zero (or near it) for years, in an attempt to maintain and create bubbles to keep that inflation going, to lighten the government's debt load etc, and to maintain the illusion that the US economy is not in shambles. It is.
> 2. Central banking systems make cash and checking possible
Oh, right. Because gold wasn't used as "cash" for millennia before central banks entered the picture? Money is just a medium of exchange, and gold was used as one exactly because its properties make it suitable for it.
> Without central banking, your bank-denominated money (whether "checking" or cash) is valued only to the extent that a third party trusts your bank
No, without central banking, my medium of exchange works just fine. That's why it's a medium of exchange - because it can be exchanged for stuff.
> Your twenty dollar bill printed in Philadelphia becomes valueless in New York, 100 miles away. Fixing this problem makes business transactions, particularly lending, easier and more efficient.
I'm not sure how to decipher this.
> 3. Broadly, fiat currency is valuable because other people deem it to be so.
Almost. Fiat currency is valuable because other people are willing to accept it in exchange for goods and services.
> Specifically, even if no other person on earth wants it, the IRS and the courts will accept it.
In fact, they will downright demand it. Governments will forcefully confiscate a percentage of what you earn, and strangely enough, they all want to get it in a specific fiat currency. Go figure.
> Being able to pay my taxes and satisfy court judgments against me in fiat currency places a floor on its value
Being forced to pay taxes in it does that. This, incidentally, was my point earlier, as I suspect you knew all along.
> 4. Ability is not action. It is a problem when and if they do happen to do so.
Oh? Does "QE" ring a bell? .. What about QE2? Or perhaps you're familiar with the still on-going QE3 they're talking about "tapering" to something like "only" 75 billion dollars per month in freshly created thin-air money?
You're so full of shit it stinks all the way to Finland. Again, not a surprise.
> Secondly, we want the money supply to rise and fall with the economy.
Who's we? And no, "we" don't. In fact, in a free market, the rising and falling of the money supply would be negligible because whatever would be used as currency could not be manipulated by anyone (by, say, pressing a button and conjuring 666 trillion quatloos into your account).
No one actually wants to use fiat currency, because it's manipulated at will by governments.
> 5. Because the prior standard for currency, precious metal, was dangerously uncontrollable.
Being uncontrollable is one of the fundamental reasons why gold was used as currency, and it's a fundamental reason for why Bitcoin has become so popular. Here in the real world, we really want our currencies to be uncontrollable by anyone.
For someone who's studied "how money works" for years, you sure are clueless about it. Of course, you might just be a government shill, out to mislead people.
When the economy is booming, if not enough gold is being mined to satisfy the need, you will have a tight money supply and all of the ugly consequences one associates with an excessively tight monetary policy. Credit becomes scarce. Growth slows. Prices fall.
If a few rich veins are discovered, and gold pours onto the market, you effectively have an excessively loose monetary "policy." Far too much gold chases too few goods. Prices rise. Bubbles inflate.
This is equally true of, say, Bitcoin. There is a fixed number being mined. A variable number are lost. Economic growth varies every year. If you were to use BTC as a national currency, your nation could be forced into an ugly monetary situation because you have put money supply outside your control. The money supply will grow and shrink for its own reasons, independently of your economy.
In any case, money supply is still a problem for businessmen. You have just surrendered human control of the supply to the natural environment (gold) or to a computer algorithm that doesn't account for your economic status in its inputs (BTC).
You got one of those right, Mr. Money Expert. I'll let you try and figure out which one.
> If a few rich veins are discovered, and gold pours onto the market, you effectively have an excessively loose monetary "policy."
The thing is, there's no need for a monetary "policy", and effecting one requires coercion. People will use whatever is the most suitable for a medium of exchange. It needs to be durable, easily divisible, valuable, and something that can't be just conjured up in massive quantities. Gold was used because it has these characteristics.
Other than that, you just leave people alone, and let them produce real wealth.
> your nation could be forced into an ugly monetary situation because you have put money supply outside your control
No, that would be a beautiful monetary situation, and "YOU" here can only be the government - some kind of central monopoly on violence that can force people to use its currency instead of whatever had emerged as a reliable medium of exchange.
You're still spewing bullshit. In a way, I hope you actually are a government shill whore puppet, instead of someone who wasted several years of his life on a completely clueless economics education.
This can be the blind "coercion" of a computer algorithm, the unintentional "coercion" of precious metals mining, or it can be the careful determination of a council of bureaucrats and businessmen.
Removing people from the equation is an option, but it doesn't remove the market forces.
No, it's coercion because I'm forced to pay taxes in a fiat currency of the government's choosing, and alternative currencies are shut down (by force, of course): https://en.wikipedia.org/wiki/Liberty_Dollar
> This can be the blind "coercion" of a computer algorithm, the unintentional "coercion" of precious metals mining
See above. Not that you're being sincere.
> Removing people from the equation is an option, but it doesn't remove the market forces.
I haven't talked about removing people from the equation.
It wouldn't make sense either, because "market forces" consist of people's actions in the market. What else could it be? It's very simple once you grasp even the very basics of how money and economies work.
Imposing a fixed amount of money on the world does not somehow imply that there is a fixed supply of money. This was a central problem in European economies for thousands of years.
You hate the central banks. Great. What's your solution? Chaining your economy to precious metals or a computer algorithm is an unpleasant alternative.
(An interesting historical option: rather than precious metals, Chinese accounts were historically backed by the productive capacity of the land. i.e. capital was defined in terms of rice. This had its own ugly side-effects. Still, it was, in many ways, less ugly than relying on precious metals, since money supply was at least somewhat correlated with economic activity)
Having the ability and using it are two completely different things.
"Competent economic management" (which establishes trust in a currency) is the answer to #2, #3. #1 - They are ranked by their primary objective which is slow stable growth.
#5 - because that is what has worked best.
Did you read Rothbard's "What has government done to our money?"
If not, do so, and come back to tell us how your mind changed, for good or bad.
If a currency or commodity accumulates value, the seller's incentive to acquire it is mathematically equal to the buyer's incentive to hoard it. Eventually, they meet in the middle and find a mutually agreeable price, because people will always want goods and services.
Just as one does not read alchemical texts for insight into modern chemistry, I have not spent very much of my life reading the Austrian school.
There is certainly a great deal of historical interest for students of philosophy, but that isn't in line with my personal interests. Broadly speaking, the Austrian school has little relevance to the study of economics or finance.
But Central Banks have the ability to make a huge difference in the quality of life/standard of living in a country depending on its competency and understanding of the economy. If you take the US as an example and compare the response to the 2 greatest financial crashes in the last century. The Fed in 1923 operated under poor information and took the exact wrong course to mitigate a financial crash by contracting monetary supply. Contrast with the Fed in 2008 to date (despite complaints) - its steps in producing massive quantitative easing was the exactly right thing to do. Given their likely responses, there are many more jobs and more economic output today than would have existed had we swapped the 1923 and 2008 federal reserve - I don't think many economists will disagree on that point.
With a decentralised currency like Bitcoin, my understanding is that monetary factors cannot be controlled. So you'd lose a very important tool when it comes to regulating the economy/applying course corrections over economic cycles.
"The prime example is the Federal Reserve’s pivotal failure to stem the flow of toxic mortgages, which it could have done by setting prudent mortgage-lending standards. The Federal Reserve was the one entity empowered to do so and it did not."
Ah, but the crisis would have happened in the absence of the Federal reserve. In fact, one could easily argue that the Fed was lobbied heavily, HEAVILY to do less by external forces and those forces succeeded. You cannot come to the conclusion that a lack of a Fed would have made markets more stable.
Without a centralised monetary authority you lose an important tool to manage a crash.
Actually you can. The modern central banking system is all part of the same homogenous system, coordinated by the Bank for International Settlements (BIS) in Switzerland, the umbrella bank for all central banks in the world.
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?
Regular people invest when investing makes sense, when the creation of a thing like a restaurant or a farm or what have you has significant value in and of itself. NOT because they value money, and the value of their money will decrease if they don't invest
Having the power to control inflation to force people to invest is tantamount to setting their mattresses on fire to get them out of bed in the morning so they'll go to work. People will get out of bed--and invest--when it's right for them, and they don't need people like you to goad them into it.
Anyone who thinks defaltion is a good idea is essentially thinking that their small cash pile will magically grow to be worth more without them doing anything, which seems enormously attractive because it's a) easy and b) there isn't any of that unpleasant risk that comes with investment, and which makes it so hard to decide what to invest in. So everyone who has money stuffs it under the metaphorical mattress, and people who don't have any can't get any because the supply of credit has vanished. Economic growth slows way down.
Under deflation the same computer would cost half as much 2 years later, and you would only have half as much income to spend on it.
Under deflation, though, everyone has less money so I have to keep cutting my rate to stay competitive. Now even though I'm more productive I'm getting a lower return on my productivity. Arguably,this is a problem currently facing much of the labor force in the US.
Any economic situation can be good for individuals who are positioned to take advantage of it, but in macro you need to consider the economy as a whole, through to food and extractive industries etc.
The Great Depression was pretty bad for people trying to get by in life, no?
Deflation isn't bad either, it encourages saving, which rather than living paycheck to paycheck as most do today.
Your solution to the problem of inflation is the abolition of credit.
If inflation encourages those with surplus income to make riskier investments, and riskier investments benefit those living paycheck-to-paycheck (say by increasing demand for their labor) then inflation is to the benefit of those living paycheck to paycheck.
On the other hand, the upper-middle-class to wealthy do benefit from deflation, since they have excess income. If inflation doesn't benefit the less well off, then perhaps there is little reason to punish the wealthy with inflation. Those that would save more in a deflationary economy are already saving though.
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?
"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."
If you're going to act all exasperated about something, at least get your facts right.
When I save money, I invest it in productive enterprise. Thus, I have less in my checking account. You could even consider (gasp) that I'm living pay check to pay check!
So? Why should they put it to "productive use"? Who deems what use is better than another?
Didn't you notice what happened during the recent financial crisis? Capital markets dried up, credit was unavailable to many small and mid-size businesses, and many of them shut down for lack of cash flow during a period of limited demand, rather than any fundamental flaw in their business organization.
Ultimately I don't really like living in a society that has so little slack in it. I'd prefer (not that anyone gives a shit what I prefer) one where most businesses have large equities built into them rather than debts. A business which owns outright the building it occupies is more likely to weather a storm than one which rents or is still paying a mortgage on. That's because it can afford to accept lower yields (not paying an extra $X per month in rent-equivalent to the owners/investors/etc) in the short term for the benefit of still being around.
Slack isn't efficient on any time scale that economists or MBAs care about but over 50 years I think it's quite a good idea. I'd rather own a business which lasts 50 years even if 10 of those 50 years don't pay the kinds of returns I'd like than one which makes better returns for 12 years and then folds.
If most businesses had large equities rather than debts, you'd have a significant opportunity cost. It's not a matter of what MBAs care about (often not what economists care about), but one of what could have been achieved with money that was otherwise sitting idle. The approach you describe often leads to zombie companies that are not actually productive but are able to cannibalize their own assets while making it difficult for more efficient producers to enter the market.
Equity means having control over your destiny, debt means the bankers decide your fate. Choose accordingly.
With this neutral terminology, we're now ready for some actual thought. We can recast the claim as follows: currency dilution is good because it encourages spending and discourages saving. There's no doubt about the factual claim—dilution does indeed encourage spending and discourage saving). But why is saving bad and spending good? This is an ethical judgment that depends on your particular set of values, but it is undeniable that currency dilution transfers purchasing power from savers to spenders. In particular, it's mathematically equivalent to combining a perfectly hard currency with forced confiscation (from savers) and transfer (to spenders), i.e., organized theft. Thus, from an ethical point of view, there is a strong reason not to give dilution the benefit of the doubt.
Regarding the so-called "gold standard", the historical evidence is not nearly as clear-cut as you've been led to believe. Though flawed in many ways, What Has Government Done to Our Money? by Murray Rothbard is a good place to start: http://mises.org/money.asp
As for saving and hoarding, those are not the same either. If someone saves they typically do so via a savings account or a CD at an institution engaged in fractional lending but (within the US and within limits) a government backstop to prevent loss of savings. Hoarding is putting your money under the mattress where it's absolutely not doing anything.
The fact that your argument requires redefining basic economic terms should be a clue that there is something terribly wrong with your priors.
In this light, let's consider four activities: spending, investing, saving, and hoarding. Currency dilution encourages the first two and discourages the second two. It also systematically transfers purchasing power from savers/hoarders to spenders/investors. Can you build a case that the benefit from dilution outweighs the costs? Dilution certainly encourages "economic activity" (for certain values of "activity"), which you seem to regard as axiomatically good. What is your justification for this?
Not taking sides here, but I think it could be argued that devaluation is good because it encourages economic activity (i.e. spending) instead of mindless hoarding.
I mean, money is supposed to be a medium of transfer, not an investment/saving mechanism. We don't want people hoarding cash in a bank account. We want them to invest that cash in actual assets that can then be developed.
So would threatening to execute anyone who spends less than n% of their take-home pay, but people don't advocate that, do they?
Before you object to the comparison, I know: "That's different: the costs would vastly exceed the benefits!"
Right, but there would be costs! There are costs any time you force people to spend (commit to purchases) earlier than they would like to -- whether you do it by inflation or the sword.
One cannot simply say, "well, economic activity [that we measure] went up, so that must have been a good idea!" But anytime someone brings up the "encourages economic activity" argument for inflation, they rarely offer any way to model the cost of moving up purchases like this, nor do they even realize it's necessary to do so!
(Edited to avoid excessive attribution of the argument.)
The government already taxes other things (both to generate income and to alter behavior), so looking at inflation that way makes it easier IMO to make sound policy decisions rather than comparing it to executions.
For those "taxes of other things", you still need to model its social cost to know whether it outweighs the benefit. You can't just dismiss the point as "this isn't execution".
Edit: Important thing to note: in most discussion of taxation, the theme is "how to avoid the deadweight loss", i.e. how to write the tax in a way where it just transfers money without inducing changes in behavior. Advocating inflation as a behavior-changing tax is a sharp deviation from this, requiring a very different justification and model than traditional taxation.
This is certainly not true for e.g excise taxes. Inflation as a tax on dollars-held is similary intended to alter behavior by encouraging those with wealth to take riskier investments (alternatively stated, to discourage long-term holding dollars, similarly to how excise taxes are intended to discourage consumption of particular goods).
When someone proposes n% inflation as a way of "taxing" hoarding, what's the corresponding model? What's the "rising sea level" there?
In cases of a ~100% "inflation tax" (aka hyperinflation), we see the harms clearly: people have to spend money almost the second they get it. They have to move up purchases and otherwise arrange their lives in ways that are extremely welfare harming, and which probably outweigh the benefits of the greater economic activity it induces.
(Contrary to a lot of talk on hyperinflation, I don't see the chief problem as being volatility; even with stable, predictable hyperinflation you have the problem of losing the main benefit of money, which is that you don't have to know what you'll ultimately be buying in order to produce something for sale.)
So likewise, to justify a Pigovian argument for inflation, you would likewise need a model, or otherwise gauge the magnitude, of the "costs of making people move up purchases [when they'd rather save and decide later]" -- the costs that become extreme in the case of hyperinflation. And yet virtually everyone enamored of the "we need to encourage economic activity" argument for activity has nothing in the way of this. Hence my frustration with it.
(The analog of hyperinflation in carbon taxes would be a ban, or absurdly high tax, on burning of fossil fuels, and has the corresponding welfare harm that the avoided fuel usage -- or costs in evading the ban -- far exceed the welfare harm of the emissions themselves.)
I haven't seen any evidence that convinces me that modest inflation causes people to spend money sooner (If you have any I would be very interested to see it).
I think that easy access to credit definitely affects people's spending behavior, but I don't have a lot of data to back that up.
You can't have it both ways: either inflation (of a certain rate) is good because it makes people spend sooner, or it doesn't change behavior.
Edit: or there's some other way in which you operationalize the goal of "increased economic activity" that's orthogonal to "spending earnings sooner than you otherwise would".
By spending I intended "purchasing depreciating (or disposable) assets"
Purchasing equities as an inflation hedge is not what I meant. Inflation does encourage riskier investments, as merely holding currency is insufficient to maintain capital.
I agree that it's an open question whether or not that's a good thing: some would argue that encouraging riskier investments encourages malinvestments which becomes a net negative; others argue that the increased activity caused by risky investments outweighs the damage done by malinvestments; I've even run into many who claim that even malinvestments are good, since moving money around is good no matter the reason.
If that last point of view is true, I'm giving up on economics, but the first two both seem reasonable to me.
And yes, there are trade offs, one of which is the malinvestments from spurring people to hold non cash. My point was that this, plus the individual welfare loss of the hoarder from having to commit to purchase sooner, must be weighed against the purported benefits of (what you got people to do via) inflation -- and (as I said at the beginning) that most people who make that argument for inflation (even economists) don't offer a way of modeling those relative benefits.
It's like arguing for an apple subsidy on the basis that apples are good, without even thinking about the costs of such a subsidy (ie diversion from non-apple production).
With this neutral terminology, we're now ready for some actual thought. We can recast the claim as follows: devaluation is good because it encourages spending and discourages saving. There's no doubt about the factual claim—devaluation does indeed encourage spending and discourage saving. But why is saving bad and spending good? This is an ethical judgment that depends on your particular set of values, but it is undeniable that devaluation (currency dilution) transfers purchasing power from savers to spenders. In particular, it's mathematically equivalent to combining a perfectly hard currency with forced confiscation (from savers) and transfer (to spenders), i.e., organized theft. Thus, from an ethical point of view, there is a strong reason not to give devaluation the benefit of the doubt.
And yet, so far as I can tell, devaluation is always given the benefit of the doubt by the mainstream. Doesn't that seem odd?
No, you can't. In fact, it is interesting that you blamed me for attempting to short-circuit critical thinking, and then turned around and suggested something so asinine as this.
The reason it is asinine is because not all forms of saving are equal. A grandma stashing cash under the mattress does not help anyone else but the grandma, which is why it makes sense to discourage it using devaluation mechanics built into the economy. But if she invested that cash into a value-generating asset (e.g. a company, a piece of real estate, a public project, etc.), both her and the asset developer/owner would benefit: it would be possible to develop and maintain the asset, and she would reap greater returns. And just so we're clear, it's not like we're forcing grandma to take insane risks. Government bonds have historically been incredibly safe. So devaluation exists as a mechanic to say to grandma, "instead of mindlessly hoarding your money under the mattress, buy bonds with it. As a result, we (the government) will be able to fund public projects and you will be shielded from devaluation."
It is difficult to argue that this configuration is less optimal than one in which money never loses value.
See also Murray Rothbard's discussion:
You may not agree with their analyses, but at least they can serve as a counter-narrative to the mainstream views you evidently support.
By the way, your comment can be improved by removing everything before "not all forms..." In that case, it would simply make a cogent point (though one with which I still take exception). As it stands, your comment comes across as petty and unrefined. Stay classy—it's nicer, and it's also more likely to persuade.
I'm not sure what that means. Jokes about relativity aside, time doing what? If you mean individual's labor (which has been tried a few times, see http://en.wikipedia.org/wiki/Ithaca_Hours), then that seems unlikely to even be fungible, much less stable.
I'd say there is good grounds for saying this is a great human invention - although probably not on a par with sanitation.
No the system isn't perfect - it is structurally flawed like all other systems - but it has worked well and the negative side-effects can be managed
> This is despite the greatest financial crash since the great depression.
Although its not the same as economic output - having stable prices is important to support growth or a recovery. Deflation prolongs a depression - this was the major motivator for quantitative easing in the last financial crash.
I should correct myself - I should have said "low + positive + stable" inflation and not just "low inflation"
Inflation most definitely favors the upper classes relative to, if not at the expense of the lower classes.
If you have a mortgage, it is likely that your net worth is negative. In such a case, inflation greatly helps your networth.
Credit card debt, mortgages, student loans, payday loans... this is the reality of the lower and middle class. If you're making less than $45,000 / year, you're likely in debt in the US.
At which point, inflation helps greatly, by reducing the value of your debt. A (former) student who has $100,000 in debt isn't "losing money" to inflation... the student is instead "losing debt" to inflation.
This system in which the middle class is by default considered the debtor class is a result of decades of manipulation.
Its hard to call it "manipulation"... although I'd argue it is widespread ignorance that has caused this problem. It is clear to me that swaths of people do not understand the concept of debt until it is too late. There is clearly a problem in the education system.
Too many people are getting too much into debt. Not on someone else's choice, but on their own choice.
There is also the option of not getting a degree at all, one which is rarely discussed. It turns out that the US Job can't subsume all of the college-level jobs anyway. A degree in Library Science is surely hard stuff, but its relevance in the modern workforce is questionable.
I dare say, its better to just get a job out of High School and start climbing the corporate ladder at Target or Costco, than to waste 4 years of your life on a dead-end degree. (And no offense to "dead-end degrees" either. Lawyers for instance, are contracting. They're currently a dead-end degree, despite the extreme difficulty and prestige associated with the field. But it is surprisingly difficult to get a job now as a fresh Law Grad IIRC).
Nevertheless, those who are $100,000+ in debt benefit from inflation. There are plenty of people in this unfortunate situation and the country should do more to support them. (the counrty should have done more to prevent them from getting into that situation... but that is another story)
I can understand why unexpected inflation would help debtors, but that's not what people argue for.
Consider that 20 years ago in 1994, the Mortgage rate was 9.17%, while today Mortgage rates are roughly 3.9%... it is clear that the market for interest rates is rather more complicated than you mention.
Second, you're right. It really doesn't matter how high or low inflation is, if it is consistent... then it is something the market will easily take into account.
So a steady rate of inflation is perfectly fair to both sides. Which is why the Federal Reserve wants to peg inflation at 3%.
So a steady rate of inflation is perfectly fair to both sides.
But it wasn't claimed that it was fair, it was claimed that it was good for debtors, which is what I find hard to believe.
But with the number of "underwater" homes, subprime mortgages, and so forth that were handed out through the early 2000s, it is clear to me that mortgage holders probably have negative net worth, especially if they were lower or middle class families.
People were buying homes they couldn't afford. In these cases, inflating their debt away is only a benefit.
Combining that with the fact that many mortgage holders would have bought before 2003, suggests to me that the overwhelming majority of mortgage holders are not underwater, which takes nothing away from the pain of those who are, but numerically, they are a minority. Perhaps half of all mortgages relate to purchases (original purchase date, not most recent finance date) prior to 2003, and I'd wager that well more than half (probably 75+%) of purchases since then have mortgages that are not underwater.
Sure, mortgage holders from lower class families are more likely to have a negative net worth. But that's almost the definition of lower class, not because they're a mortgage holder. Lower class families with last names starting with "S" are also more likely to have negative net worth than average families; has nothing to do with their name...
Totally agree that inflation is the friend of a fixed coupon debtor. I'd be hard pressed to decide to pay off my house even if I had the free cash to do so. It will be much cheaper to pay it off with massively devalued 2024 and 2034 dollars.
I worked in a bank for a few years - doing credit risk in both consumer (cards, personal loans, etc) and investment banking (bonds). When it comes to consumer loans, like cards, mortgages, personal, etc, the basic formula is the cost of funds plus a margin that reflects the risk (i.e. card loans more risky than mortgages).
Cost of funds relates to how much it costs for the bank to obtain those funds - its an aggregate of various wholesale market rates, the composition of its deposit base, and a bunch of other things.
Inflation risk is something I never had to factor - but it could have just been because I wasn't working in a time with a major inflationary shock
In a deflationary economy, then "zero-risk" would be just holding on to the cash. Of course, that's still not risk-free since you might have been wrong about the economy being deflationary.
I'm well aware that there's a risk-spread over the base rate for mortgages. My point was that the GP said he worked in a bank pricing credit and never had to figure anything to do with inflation; he only had to deal with a cost of funds figure and therefore banks don't price inflation into credit products.
My point was that cost of funds figure WAS the inflation figure.
Now, if you're arguing that there isn't 100.000% correlation between the various cost of funds rates and the various measures of inflation, I'll agree, but posit that the correlation is high, just not perfect.
greed, illusion and disinformatuon has sucked their common sense. one can't win against zombies.
edit: 4 downvotes on this. point proven.
When satire doesn't work, the author looks sillier than your target. I don't think this was a goal.
PS: Drug kingpins have been known to dump small denomination bills as not worth the hassle.
A seller of an object must expose himself when he tries to collect his cash. With bitcoin, he can simply give a wallet.
So the flaws of cash listed in the article are superficially plausible but we know they weren't much of a barrier to wide adoption.
This was not always the case.
Before the advent of central banking, cash was just as dodgy as Mt. Gox internal transactions. You were unlikely to be able to use cash more than five miles from the bank that issued it. Balance statements were purely arbitrary because you had no insight into your (unregulated) bank's books. In the 19th century, transactions across long distances looked more like hawala than anything the modern man would recognize as banking.
This satire was written by someone who does not understand what he or she is attempting to satirize.
Perhaps the author understands what they're satirizing a bit more than you're giving them credit for.
A citizen being asked to pay his legal due in taxes is exactly the same as being repeatedly robbed by thugs.
Something something monopoly on violence.
Consider where that initial cash came from. You worked your ass off between 18 and 60 and you got a bunch of cash in exchange. Some you spent on consumption, some you saved for use later. In fact, cash is just 'tokens for exchange later' where later is a time window that varies from 1 hour (hand-to-mouth) to 50+ years (surplus productive capacity people).
Wouldn't it be great if you could use your tokens for their promised exchange-value through your retirement and see those years of hard work payoff? In fact, multiply, because as you said the population grows, more goods are produced, and your cash tokens buy more and more of those goods.
It's a great way to retire. Unfortunately for the retired, they are on fixed incomes (pensions) in an inflationary world: those people get SCREWED to the extent where they can't afford heating in some US States.
These are people who worked hard all their lives and just wanted to live off the proceeds, the surplus they had generated.
Think of the chi^H^H^H grandparents!
Saving is a useful economic activity. Why should I let some filthy money lender touch my money? It's my money!
Of course, your underlying point is correct - both these examples are coterminous with vast transformations in the two societies (the civil war and the Glorious Revolution), which equally were not dreamed up by a nerd in a basement.
 James McPherson's Battle Cry of Freedom has some interesting material on this.
Consider lines like this one:
"...it would be hard to recommend that the average consumer or merchant becomes involved in what is still today a very buggy [central banking] system, filled with risk, inconvenience, high transaction costs, and possible disease transmission."
In fact, the fact that these 'critiques' don't actually apply to central banking is what makes this piece so funny.
- bitcoin's biggest user wasn't a douchebag who thinks its ok to hire hitmen to kill people
- mtgox didn't have so much trouble staying online
- the currency wasn't so volatile
- there was some way of storing bitcoin with a guarantee that you'll get fully refunded if it gets stolen
...then perhaps this satire would make some sense. As it is, the 'satire' is just making the authors look like idiots.
Also, the ~7 transaction per second limit is completely artificial: https://github.com/bitcoin/bitcoin/blob/master/src/main.h#L3...
Institutional actors: http://allthingsd.com/20131212/bitcoins-biggest-bet-andreess...
1. My local government can choose to accept anything they want. The IRS, however, will want cash. They are not obligated to talk to your broker-of-choice about BTC.
2. Yes, "completely artificial." I just have to convince 51% of the distributed net to accept my patches, and then I can change any parameter I wish!
3. What does a VC investment have to do with anything?
The folly that is being held up to ridicule are the objections to bitcoin.
The means by which it is held up is to show that bills as a medium of exchange can be attacked just as strongly. People still use it. Nobody is going to make you go to the bank to give them $5 back, they use bills. And if you only have a $10 note, they'll make change for you.
This is directly what's being compared to bitcoin (for example) - by pointing out that whatever objections anyone might have against bitcoin (theft, etc), could be made - ridiculously - against paper currency.
The reason it is ridiculous is because the benefits of paper currency far outweigh the inconvenience stemming from using it.
Likewise, bitcoin can have tons of problems - but the benefits far outweigh them. That is the point being made.
"It is folly to criticize bitcoin".
I would think of a currency as anything that has recognized value while being transferable.
Let's imagine starbucks prepaid point card get's accepted in some drugstore also, the. Some super markets, gas station, theaters, airports. It really explodes and you can start paying with them at millions of stores, and you are allowed to exchange them with other people via some procedure. The starbucks point system becomes a currency IMO. You'll never pay your taxes with it, but you can use them for exchange and commerce purpose.
No, that's either packet switching, internal combustion, penicillin, or sliced bread.
Also, whether bitcoin is a "true" currency is orthogonal to the (satirical) point of the article, which is that paper currency would look weird if it weren't the traditional way and we were going to it from digital money. Whether Bitcoin currently handles 1, 7, or a trillion transactions per second is irrelevant here.
Really tired of central banks and banks stealing 97% of the peoples wealth through inflation of FIAT currency backed by nothing than debt out of nothing. Here is a graph of median income vs GDP(average income), note that it diverges in the 1975, when by coincidence the dollar was decoupled from the gold by Nixon.
Central banking and fractional reserve banking are orthogonal concepts. One could, in theory, accomplish one without the other. (but I do not see why one would wish to do so.)
on "You just have to place an inordinate amount of trust in your BTC bank (perversely misnamed "exchanges")"
my understanding of Bitcoin is that no same Bitcoin can be in two accounts at the same time. How is this a "trust" issue vs a design one?
MtGox just as easily operate a fractional reserve system on that MtgOX-denominated balance as a bank does on cash.
This is how all banks worked before the advent of central banking. As with MtGox, in the world before central banking, exchanging real money (coinage and federal certificates) for bank-denominated money (checking) was a risky choice.
Can you please explain to me how can a BTC exchange can run fractional reserve banking with the current design of Bitcoin? Because I can't.
At that point, nothing stops MtGox from operating a fractional reserve bank. Or just stealing your deposits.
Substitute any other "exchange" name for MtGox. The principle is the same.
If it has 1 bitcoin of deposits and writes 0.5 bitcoin of loans, it can't cover the deposits anymore.
I think maybe you are talking about the money creation that a central bank can do. That involves more than just fractional reserve banking, but it often is done in the context of fractional reserve banking.
Wow. Information/knowledge is one click away. I highly advise Google.
It would be useful for you to explain how 'making loans of deposits' is not a reasonable simplification of that.
Of course actual banking practice is more complicated, but the core meaning of fractional reserve banking is to make loans (or investments, but that is a reasonable thing to leave out in a simplification) out of (demand) deposits (the difference between a deposit and a demand deposit is just a technical matter, for btc the lending institution and depositor would have to work out how immediately available the deposited coins would have to be).
I think the biggest obstacle for bitcoin is that it is not a legal tender and it will not be because it comes with one to many sacrifice. You lose ability to have independent monetary policy while not getting benefits of a fixed currency.
Or are you implying that Bitcoin should only be used by large corporates, speculators, money managers and so on?
Also, if you think that central banking is the greatest invention since sanitation, I think you may have your priorities slightly skewed, though that is only an opinion.
As to whether bitcoin is a currency. It is a currency when it is used as one. Sometimes it is and then it is a currency, mostly it is a speculative investment vehicle. This is why I think dogecoin is more of a currency than bitcoin at the moment.
What is being held up to ridicule are the various criticisms of bitcoin, not central banking. For example the article quotes an economist saying that paper money is evil, satirising Krugman's article about bitcoin. Quite entertaining!
The article is not making fun of cash, but making fun of people who mock the concept of bitcoins.
> Central banking is possibly the greatest human invention since sanitation.
This is a most deceptive and inherently political statement. Sanitation is a great invention for everyone. Central banking not so much.
Central banking and centralised control of the money supply serve to concentrate the greatest opportunity for skimming the surplus generated by vast productive populations into the hands a very few people to direct as they wish. Whether this process is controlled democratically or not (and in the US it most certainly is not) is not the point.
The way this is done in the US is no different in principle to the way it is done by elite in more obviously "corrupt" countries. In the US, it is more sophisticated and over the last century it has attained the patina of established respectability. In the US they have managed to set this system up without killing the goose that lays the golden eggs. (the surplus-producing population)
The skimming in the US is accomplished first through powerful central taxation which requires centralised record keeping and control of the banking sector. Secondly wealth and accumulated surplus is skimmed (redistributed upwards) through the control of credit extended by banks to generally expand and potentially to "contract" the money (credit) supply. Inflation generally rewards large debtors and punishes savers.
Skimming is also accomplished by helping to grow and trade in government debt (granting incredibly valuable concessions to favoured dealers), assisting in managing capital flows into and out of the country, extending vast credits to powerful interest groups (mostly bankers) thereby helping powerful private borrowers to lean on the public credit for private gain, and most importantly and tragically to make possible and in fact encourage wars of choice which are clearly to the benefit of private interests and clearly not of any benefit to the general public. Is it any wonder that the Fed was created by bankers and war financiers, for the benefit of bankers and war financiers? This goes back to Morgan and others and their intimate involvement in the financing of Britain and France and subsequent agitation for American entry into WWI.
Central banking is most convenient and necessary for anyone wishing to control or direct economic activity and hence the lives of others. That is why it appeals to statists of all persuasions who perceive it as powerful lever or tool they hope employ in their fantasies of control. Prominent early communists saw state-controlled central banking as an essential step for converting a capitalist system to a communist one. That is also why most "crazy libertarians" find their way to a stance opposing central banking. Central banking is anathema to Liberty. Jefferson killed the first Bank of the United States and exposed it as an agent of foreign interests. (The capital for the first bank was created by an early scam which had people talk down the debts of the continental congress and buy up the IOUs from the poor soldiers who fought for the revolution for a few pennies on the dollar, and then lobby successfully for the debts to be assumed and honored at face value by the new constitutional government. This was a similar scam to the way the oligarchs in Russia convinced newly enriched peasants to sell their shares in state assets for cheap.) Jackson killed the Second Bank of the United States for much the same reasons as Jefferson had a generation before. Seventy years later, a true, well documented conspiracy of financiers, gave the US its third central bank.
I agree with other posters, that one must look at the actions and histories of many different central banks in different countries to understand the nature of the beast. The US is only the most competent in obfuscating its nature, purpose and origin. It has "won" at the central banking game for almost 100 years. Your praise of the US's central bank comes at the zenith of its power. I suspect over the next 10 years, it will resemble its cousins in less competent regimes and juridictions more and more.
The US central bank, aka the Fed, is a brilliant creation. It is a brilliant creation of the fevered minds of oligarchs to defend and advance their oligarchy. It has lasted 100 years. I hope it will not last another 100. With Idiocracy increasingly fast upon us, the prospects for change are not good. Bitcoin to the moon.
For example, if we post on HN an offer to do something in return for something..what currency are we using and is that said currency some sort of fiat system?
You can keep them in storage, and in 100 years they'll only have lost a mere 97% of their value.
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.
"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.
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.
"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.
> 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.
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)
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.
Hm. Partly true, but only if their time horizon is the same as your boss. It definitely gets complicated here - we probably need rigorous models and/or simulation.
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.)
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.
As for "chargeback insurance", I'd recommend taking responsibility for your own actions. If you buy crap from a merchant, that's between you and the merchant. Argue with him; don't buy more from him. The bank isn't a party to that argument. That should be enough to discourage such behavior. Additionally, they may have to pay the merchant and you. That's what the fees are for.
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.
You'll probably save in the long run.
I especially think this is interesting:
>McDonald's found that the average transaction rose from $4.50 to $7 when customers used plastic instead of cash
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.
It was annoying to rearrange my automatic bill paying, but that's what I get for only having one checking account.
They got nothing from it.
Not completely no. A little fraud is normally necessary. A little social pressure, just one person not following proper security procedures. Note how Jeremy Clarkson published his credit card number to prove that leaking credit card numbers wasn't a security issue, and someone promptly withdrew £500 from his account (http://news.bbc.co.uk/1/hi/7174760.stm). I understand that the bank takes the hit in cases like that, but in the meantime you are out of pocket of far more money than you were carrying in cash.
My point is there is a non-0 (albeit small) risk that they do get something from it. And then its a hassle to sort it out (check statements carefully for the next few months, phone bank on any suspicious items). I realize I ought to be doing that anyway, but it normally falls so low on the priority list I end up checking once every 3 or 4 months.
That's not really relevant, and you don't check statements, you phone them and they send you an entirely new card and deactivate the old one.
Being robbed is not a financial worry for people who aren't living check to check. It's a worry about getting shot, and I don't think bitcoin protects you from that.
Cash == Freedom
But I would rather that than to be mugged at knife-point because people holding large amounts of cash is a quick win for criminals.
The same goes for smartphones and tablets. If they are easy to sell on after stealing, crime will go up. Making the items useless if stolen removes the incentive.
Cash cost me money, cards cost me nothing.
So cards are a form of insurance - in that they spread around the risk.
This is more commonly known as "marketing".
For example, the article claims that Cash is loved by Libertarians. As far as I'm aware, Libertarians would prefer privatized currencies, akin to the mid-1850s banking system. A centralized institution creating a centralized currency is much different from what the libertarians would like.
They miss the basics of the politics involved here. BTC (apparently) represents decentralization, freedom, etc. etc. At least according to libertarians.
The complaint about the lack of tracking and anonymity is also ironic, because BTC "marketing" has been filled with misinformation and lies. Fortunately, the article seems to take the correct stance. (BTCs are tracked, the ledger is public, it is far easier to be anonymous with Cash than it is with BTC).
Finally, there are systems in place because Cash has a 200+ year long history. It is impossible to ignore the "momentum" of cash. FBI has ways of tracking and marking bills. Secret Service actually keeps track of those Serial Numbers.
Besides, BTC is but the first popular poof-of-work cryptocoin. I don't think BTC is perfect for many reasons... I think DOGE is going in a better direction.
The article fails to mention any of _my_ complaints. The extremely long transaction time (10 minutes minimum, if you are willing to trust a 1-block confirmation), the deflationary nature (block chain rewards halving every couple of years). The hard cap at 21 million (DOGE has no cap on coins fyi).
You know, the legitimate complaints about BTC, the ones that people are trying to solve with alt-coins.
Maybe the speculative "hold to hoard/invest/speculate" thing is just a phase.
We have ton of unstable events going on in credit card land, but the vast majority of individuals filter those events from their fears because they are bored with that type of news. With Bitcoin, it's interesting, so you pay attention. Once you start paying attention, it's not hard to be surprised about something happening within the movement. If anything happens that causes a concern (fear) you get people going "Oh my gosh! Look at how awful this Bitcoin thing is because it's so unstable! It's gonna fail, for sure!".
Wait a few minutes. The hive mind will find something else to become surprised/fearful about soon enough. Boredom will kick in and everyone will settle down and forget their fears. By then they'll wonder how they lived without it.
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 and http://en.wikipedia.org/wiki/Baby-Boom_Generation
"By 2015, those aged 50 and older will represent 45% of the U.S. population (AARP)."
Ok so not exactly 75%, but I was a lot closer than the 15% you mentioned.
Also "By 2015, those aged 50 and older..." Some of those people wouldn't be considered baby boomers as that generation ends in 1964.
Banks are already set up to provide these services and when they decide to jump in, adoption will take off pretty quickly. Those services could come in the form of cash exchange at ATMs, wallet hosting, compromised savings wallet insurance (if they host your wallet), best practices around passwords/etc., loans, and cold storage security via fireproof lockboxes.
This will (obviously) require the banking industry to wrap their heads around these new models. How long that takes is anyone's guess.