Despite what everybody likes to think, politicians aren't idiots.
When somebody disagrees with me, I like to assume that they're not idiots and that the disagreement might be based on some legitimate point that I've missed.
The truth is that Bitcoin is an existential threat to the United States government. As long as it's some third tier crypto currency only used by nerds on the Internet, it doesn't matter. But the infrastructure is being laid to push it as a (the) new global currency.
If that happens, we will witness an economic revolution with no parallel in history. It will literally be raining cats and dogs in the street.
Practically overnight, the US will lose the ability to borrow in its own currency, forcing a quick tightening of monetary policy, further exacerbated by foreign governments dumping their dollar reserves. The dollar <-> XX exchange rate would approach zero. Anyone holding dollars would no longer be able to afford any foreign goods. Dollar inflation would be rampant. A recession or depression would quickly follow.
Anyone not holding bitcoin will become the new underclass, and the new rich will be those who got in early. Essentially, the new world order will basically be made up of lottery winners.
Pensions would become practically worthless, as they would need to be converted to the new currency to be spent.
Etc, etc.
That's why I don't have any money in bitcoin. It can't succeed. The current world order won't let it.
There are a lot of bold comments that you're making here.
Pensions would become practically worthless, as they would need to be converted to the new currency to be spent.
If pensions hold real assets (land, companies, etc) the currency of the realm doesn't matter much, whether it's dollars, euros or bitcoins. Most pensions aren't just sitting on cash.
Anyone not holding bitcoin will become the new underclass, and the new rich will be those who got in early
Again, real asset holders don't care about the coin of the realm. If you own a company, you can sell it to buyers in whatever currency you want. Net lenders may be harmed, because they could get paid back in less valuable dollars. Net borrowers may be helped, because they can pay their debts in less valuable dollars.
It will literally be raining cats and dogs in the street.
Literally?
I find a lot to disagree with your points and hyperbole. The irony is I am fully in agreement with your last point. It can't succeed. The current world order won't let it.
The cats and dogs line was a joke. In this case, I added the word literally to mean "usually when people utter this phrase they actually mean it figuratively, but I'm making such a strong statement that I'm really trying to say this time it's for real". Its extra hyperbole for comedic effect.
I take your point that a lot of pensions hold real property, but they also hold a significant amount of dollar-denominated assets. They don't have to go to zero for my raining cats and dogs point to hold, they just have to decline a significant amount.
Your second point is actually missing my point. I'm specifically referring to the transition in which anyone holding dollars will find their dollars worthless and anyone holding bitcoin will become filthy rich practically overnight. Think of it like a bank run. After the transition, business will continue as normal in the new currency.
Also, it is a good point that anyone holding debt denominated in dollars will find their debts disappear. I'm not sure this is a positive outcome.
Also, it is a good point that anyone holding debt denominated in dollars will find their debts disappear. I'm not sure this is a positive outcome.
It's positive for the borrower, negative for the lender. Same as any unanticipated inflation. In your example, it's just a more extreme case.
I take your point that a lot of pensions hold real property, but they also hold a significant amount of dollar-denominated assets. They don't have to go to zero for my raining cats and dogs point to hold, they just have to decline a significant amount.
The denomination doesn't matter as long as it's a real asset. If it's property, you can sell the house in a new currency. If it's a share in a company, the shares may be quoted in dollars, but they can always be sold in another currency.
This isn't to say that there wouldn't be massive upheaval, I just don't see it happening in the way you do. The impact would be more like the scenario if the dollar doesn't become the world's reserve currency. There would be significant increases in US borrowing costs, and a long term drop in our growth rate. But assets won't go to zero.
We live in a country where a Governor will ban large soda's for our protection.
Every bag comes with a warning "not a toy".
Houses come with disclaimers not to eat the paint chips.
Raw Milk (which I wouldn't touch) is illegal for public safety.
By all counts, Bitcoin is scarier than any of these things. If not banned it should have warnings. We don't have a good way to put warnings on it so we ban it. Right wrong or indifferent that is what America does. Manchin is just making sure he gets credit for an idea that was sure to come up.
I see it the other way. From the comfort of my home computer I can speculate on the value of U.S. corporations, the future value of U.S. corporations, the value of shiny yellow metal, the exchange rate between the dollar and the turkish lira, the exchange rate between the dollar and the euro 12 months from now, the price of cattle, the price of corn, the interest rate on 30 year treasury bonds 6 months from now. The list goes on and on. I can do all of that legally. We have all the necessary legal and regulatory framework to support it. So to say, "yes you can make risky speculative bets on the price of gold but not on the price of bitcoin" doesn't really make sense to me as an American.
Why is the US like this? (I'm from the US). Was it caused by lawyers? Liability laws that allow crazy lawsuits? How can this be avoided in other up-and-coming countries? (I fear it's too late for the US to change course on this). Or is it just an inevitable result of being a rich country founded by lawyers?
As someone genuinely curious (and without a lot of international experience), I was wondering what countries are out there that you feel are better at not over-litigating on those things.
Aren't you guys getting tired of all the annoying buzz around Bitcoin already? Do something good for this world and create something of essence, not yet another vehicle for speculators and ugly (personality) people like Barry Silbert and the Winklevii. When I look at those two (three?) alone, I see "greed" and "envy" in all caps! Fred Wilson really lost all my respect after I saw him during the hearing - he's a small little person! He and Paul Graham are like night and day!
It's beyond obvious that 2013 will be the year of Bitcoin growth and 2014 - the year of its demise. I have to agree that the technology has some decent niche applications, but world-changing it is not.
Congrats on the open letter. Have you also tried emailing, or writing a real letter? I have gotten a few personal responses from well reasoned emails I have sent, including one after seeing my senator publicly change his position in my favor. They really do listen.
An open letter is mostly just going to get other people on the internets to agree with you.
Oh, and if you are going to fight for less regulation you might want to wait for the only BTC news story in the popular media to blow over.
Coinbase isn't an exchange. It's a dealer. Coinbase is the counterparty to every trade and they have no obligation to quote you a good price. There isn't an order book or anything like that. Amazing how many people don't get this.
Sure. Let's start with dealers. A dealer is a party that stands ready to buy or sell something (in this case bitcoins). When you want to transact, you ring up the dealer and ask for a quote. The quote is composed of a price at which the dealer will buy bitcoins and a price at which the dealer will sell bitcoins. If you like the price, you do the deal. So throughout the day, the dealer is constantly buying and selling. The difference between the buy and sell price gives the dealer his profit. If a dealer decides he is building up too much inventory, he may, for example, lower his bid price (widening out the spread) so that fewer parties will be interested in selling to him. That's the basic idea of a dealer.
Now exchanges. The idea with an exchange is to match up a plurality of buyers and sellers. Exchange participants can send in orders to buy or sell a specific quantity at a given price (these are called limit orders). These orders are all combined and sorted by price into a limit order book. If you look around at some of the bitcoin exchange sites most of them will show you the state of the book†. When you look at a quote at an exchange you are really looking at the highest priced buy order (or the aggregate of all orders at that price) and the lowest price sell order. When market participants wish to transact immediately, they can send in a marketable order, meaning that buyers will pay the best offered price or sellers will pay the best bid price. Marketable orders "cross the spread". The exchange is responsible for updating the book and distributing it to market participants, but the exchange itself doesn't do any buying or selling. Exchanges take a percentage fee of each transaction which is the source of an exchange's profits.
Let's say I'm a bitcoin miner. My mining machinery creates bitcoins out of electricity but I still need dollars to pay the utility bill. This makes me a natural seller of bitcoins. When I go to sell my bitcoins, I want to get the best price for them. I might post a limit order to sell at what I think is a reasonable price on an exchange and wait for my order to get hit. I might also look at the lowest offer price and decide to post my bitcoins for sale at a penny less in order to increase the probability of getting my order filled quickly. This kind of limit order trading is only available at an exchange. If I could only transact with a dealer, I'd have to either cross the spread and accept the dealer's bid or not do a deal at all.
When somebody disagrees with me, I like to assume that they're not idiots and that the disagreement might be based on some legitimate point that I've missed.
The truth is that Bitcoin is an existential threat to the United States government. As long as it's some third tier crypto currency only used by nerds on the Internet, it doesn't matter. But the infrastructure is being laid to push it as a (the) new global currency.
If that happens, we will witness an economic revolution with no parallel in history. It will literally be raining cats and dogs in the street.
Practically overnight, the US will lose the ability to borrow in its own currency, forcing a quick tightening of monetary policy, further exacerbated by foreign governments dumping their dollar reserves. The dollar <-> XX exchange rate would approach zero. Anyone holding dollars would no longer be able to afford any foreign goods. Dollar inflation would be rampant. A recession or depression would quickly follow.
Anyone not holding bitcoin will become the new underclass, and the new rich will be those who got in early. Essentially, the new world order will basically be made up of lottery winners.
Pensions would become practically worthless, as they would need to be converted to the new currency to be spent.
Etc, etc.
That's why I don't have any money in bitcoin. It can't succeed. The current world order won't let it.