mrbluze writes:
"An interesting blog post by Charles Hugh Smith on Why Banks Are Doomed: Technology and Risk.:
The funny thing about technology is that those threatened by fundamental improvements in technology attempt to harness it to save their industry from extinction. For example, overpriced colleges now charge thousands of dollars for nearly costless massively open online courses (MOOCs) because they retain a monopoly on accreditation (diplomas). Once students are accredited directly--an advancement enabled by technology--colleges' monopoly disappears and so does their raison d'etre.
The same is true of banks. Now that accounting and risk assessment are automated, and borrowers and owners of capital can exchange funds in transparent digital marketplaces, there is no need for banks. But according to banks, only they have the expertise to create riskless debt.
...
One last happy thought: technology cannot be put back in the bottle. The financial/banking sector wants to use technology to increase its middleman skim, but the technology that is already out of the bottle will dismantle the sector as a function of what technology enables: faster, better, cheaper, with greater transparency, fairness and the proper distribution of risk.
There may well be a place for credit unions and community banks in the spectrum of exchanges, but these localized, decentralized enterprises would be unable to amass dangerous concentrations of risk and political influence in a truly transparent and decentralized system of exchanges.
It's still early days, but can new electronic currencies such as Bitcoin become mainstream without the assent of governments?"
(Score: 5, Insightful) by Anonymous Coward on Monday February 24 2014, @11:10AM
(Score: 5, Informative) by Anonymous Coward on Monday February 24 2014, @12:05PM
Short version:
Banks do for people what the author maintains people can do for each other, with technology. Thus banks are an unnecessary expense, thus banks get dropped.
Expanded short version:
The role of banks is to extend credit. They do this (relatively) well by assessing the risks of potential debtors, and skim profit from the interest.
The author argues that people can, using technology, effectively crowdsource better credit risk information than banks can.
The author's conclusion is that as and when that becomes technologically implemented banks will wither because they will be a more expensive source of credit than some technocredit alternative, whatever that ends up looking like.
(Score: 5, Informative) by tomtomtom on Monday February 24 2014, @12:32PM
This massively understates what it is that banks do (and what the core useful part of their business is). It is not simply the extension of credit (after all, the bond market has done this as well for a very long time and banks still exist), but also the fact that they are engaging in maturity transformation - so that depositors have access to their money on demand whereas borrowers get to pay their mortgage back over e.g. 30 years.
Maturity transformation is not something which peer-to-peer lending can do on its own (you could simulate it to some extent with an easily-tradable and liquid pool of loans but with the obvious downside that prices may go down through normal fluctuations in the market), and it is also what leads in large part to the need for deposit insurance and all sorts of other regulation like solvency and liquidity rules (which ultimately exist to prevent runs on the bank).
(Score: 2, Insightful) by DeathMonkey on Monday February 24 2014, @02:53PM
This massively understates what it is that banks do (and what the core useful part of their business is). It is not simply the extension of credit (after all, the bond market has done this as well for a very long time and banks still exist), but also the fact that they are engaging in maturity transformation - so that depositors have access to their money on demand whereas borrowers get to pay their mortgage back over e.g. 30 years.
Agreed 100%. In addition to that, banks can simply adopt these exact same technologies. Not to avoid withering and dying but just to improve the bottom line. Then people have the choice of doing their banknig with an FDIC insured entity with a name they recognize vs. some guys on the internet. Guess who most sane people are going to keep their money with...
(Score: 1) by Blackmoore on Monday February 24 2014, @05:34PM
Well; no. the banks CAN'T adopt crowdsourcing technologies. Conservative as they are - that would not be something you will ever see.
You MIGHT see a federal Credit union adopt this. And they would work it until the next recession and lose on the deal.
(Score: 1) by WillR on Monday February 24 2014, @06:04PM
(Score: 4, Interesting) by edIII on Monday February 24 2014, @03:46PM
It also seems that it's massively understated just how dangerous the banks are .
Deposit insurance does protect the plebes (who is really going to have more than 250k-especially in a great depression), but that is about the only good regulation that exists for consumers.
The rest of it is a nightmarish cluster$*%$. This great depression is 100% the fault of the banks collusion with Wall Street. So where were all the regulations that should have protected people from the banks, and the banks from themselves ?
Mortgages should have never been securitized, as the inherent greed and shortsightedness with the banks and Wall Street was a recipe for inevitable disaster. There were no other logical outcomes from such an environment. We had legislation that protected us from that - Glass-Steagall.
Banks with deeds of trust were then able to steal billions worth of residential homes (in use at the time) as nothing stops a deed of trust except a judge that is willing to put his/her foot down. Even if you can prove mortgage fraud, the foreclosure process is 'not the proper venue' for disputing it. Untold amounts of property were stolen in Nevada due to this little regulation, so wholly toxic to the welfare of our country, that it's amazing it took years for judges in Nevada to have had enough of it.
How many games do banks play?
Wells Fargo will only accept a transfer to a savings account to eliminate fees *only* if it is an automatic transfer. Doing it yourself doesn't work. As a software engineer, that means the rule essentially comes down to the source of the API request. Was it from a cron job or manual activity on the website?
The law that attempts to eliminate egregious and unreasonable overage fees. $35 is an absolute insanity. Wells Fargo doesn't suffer $35 for what amounts now to electronic transactions. Bankers (which are the epitome of laziness anyways) are not working overtime to balance books anymore. They're nothing but monkeys on a keyboard now. Skillsets have been reduced to routine operations of CRMs and other backend information systems. There is a law that says you can opt-out of the 'courtesy' of them allowing your bank account to go negative, with no consequences to you. However, they found a loophole with that. Any debit/credit transactions bypass those laws.
So I'm at a complete loss when you say regulations keep banks in line and they are the only ones that can service our needs.
No. They've been so toxic I don't even care about 'maturity transformation'.
If we can bypass the banks and go with technology that will be infinitely better. I would rather deal with a market and transaction system that fluctuates and is highly chaotic than a system that actively works against the best interests of all Americans, and may have tanked the entire economy, and put millions upon millions out of their homes with their retirements effectively obliterated .
Banks don't have any rules. There is only one rule. We do want we want, we screw who we want, we don't suffer consequences, and if you have a problem, screw you, if we have a problem, what's that phone number for the Senator again?
As soon as I can ditch the dollar and use this new technology the better. Banks are a pox on the world.
(Score: 1) by Wootery on Monday February 24 2014, @07:09PM
I would rather deal with a market and transaction system that fluctuates and is highly chaotic than a system that actively works against the best interests of all Americans, and may have tanked the entire economy
Could this be a Tragedy of the Commons?
It's possible that each individual is better off using a bank (for stability), despite that overall, society is worse off for using them.
(Score: 0) by Anonymous Coward on Tuesday February 25 2014, @11:45PM
No, banks can work fine for society. It's the deregulation and changes in laws some years back that allowed the banks to do all that bad stuff. Backed up by support from the people at the top - given the verdicts in many cases were to let the culprits go free with the money still in their hands, I'd say it was intentional theft by the 1% from the 99%.
Who did the Federal Reserve really help when they loaned trillions of US dollars from thin air?
Go see how favored people in banks are treated when they launder money compare with what happens when others do it. No jail vs jail.
Go count how many people went to jail for this: https://en.wikipedia.org/wiki/MF_Global#October_20 11:_MF_Global_transfers_client_account_funds_to_it s_own_account [wikipedia.org]
( If I transferred someone else's money into my account without their permission, it's considered theft even if I give it back in full - I'd still get in big trouble, but these people go free).
As the Iceland example shows - you don't have to bail out the banks, bail out the depositors and let the banks die (and jail those who commit crimes). The finance bunch may scream about it, but once you recover and do well, they'd be back because they can make lots of money again (just like they did when times were good).
(Score: 5, Insightful) by ikanreed on Monday February 24 2014, @03:52PM
And they have the means and experience to enforce their debts. If some random stranger you micro-loaned $100 just stopped paying, you'd be hard pressed to find a solution cheaper than ignoring it.
(Score: 0) by Anonymous Coward on Monday February 24 2014, @10:35PM
As the creditor, it would be your responsibility to assess the trustworthiness of potential borrowers, or use an escrow service.
(Score: 1) by sjames on Tuesday February 25 2014, @08:21PM
Agreed.
What banks should fear is the far more common day to day activities of transferring small amounts of money through debit cards and checks plus the somewhat larger direct deposits and monthly bills.
(Score: 1, Insightful) by Anonymous Coward on Monday February 24 2014, @12:57PM
This is all true and false at the same time.
Banks are allowed to do what they do because of the law, not technology. You can start your own bank or financial services company, if you'd like to. It's not easy and there are lots of laws you'll need to comply with thanks to all the bad people and their illegal activities.
(Score: 0) by Anonymous Coward on Monday February 24 2014, @10:53PM
> They do this (relatively) well by assessing the risks of potential debtors, and grow rich off the fat of the interest.
There, FTFY!
(Score: 5, Interesting) by morgauxo on Monday February 24 2014, @11:13AM
Not going 10s of thousands of dollars into debt just for the privilege of maybe getting a decent job with which to pay of that debt over the next several years.. that sounds good.
Trading some of the best years of my life and the experiences that made me who I am today for years of sitting alone in front of a computer just to eventually take some tests in front of said computer...
OMFG! What are we doing to our children?!?!
(Score: 5, Interesting) by nitehawk214 on Monday February 24 2014, @11:48AM
While I think there are better ways to accomplish education... and many people squander their college years... What would you suggest here? Eliminate higher education? Sure, my "real world" education is worth 100x my college degree. (and cost 1/100th as much to obtain) But if I had not gone to college, I would have never been put in the position to obtain my real education in the field.
In the 90's it was all about go to an alternative trade school instead of a college filled with useless classes and wasted money. But those are so myopicly focused on just getting a few skills to get kids employed, that they totally skip on actually educating. You have tons of kids entering the workforce with skills that will be useless in a few years, rather than professionals that have the tools to learn new things.
"Don't you ever miss the days when you used to be nostalgic?" -Loiosh
(Score: 3, Interesting) by starcraftsicko on Monday February 24 2014, @12:58PM
So which college is it that turns out these professionals you speak of instead of this other trash? Is there some special class? Does joining a fraternity make the difference? Special drugs? Casual sex? Parties? On credit?
I don't want to understate the value of formal education, but I don't think 'accredited colleges' have some magic answer that makes 'professionals with the tools'. You may be such a professional - I may even be one - but I don't think we can really say "because college".
Absent something definitive, I find the description of 'college' as an artificial monopoly on imaginary goods (accredited diplomas) to be spot on. You must have your ticket to board the middle class train, but that doesn't make it justice.
(Score: 5, Insightful) by frojack on Monday February 24 2014, @02:06PM
I agree, this is pretty much true when one looks at what is actually taught in college these days. (or any "days").
The principal purpose of college is to serve as a sieve. To sift from the masses those with the natural talent and intelligence to manage civilization and society, and promote them into such positions in life.
This latter part, the promotion bit, is done mostly via good-old-boy-ism, with employers valuing the possession of a degree, (any degree) as a marker for someone who can be trusted to keep civilization on track, to preserve what we have built up over centuries. The employers view their role in this process as simple self interest, but it works nevertheless.
It's not what you learn in college, it's that you learned. You stuck it out. You finished what you started, and maybe even excelled at it. Any knowledge you picked up is a bonus.
College doesn't make people smart, or knowledgeable. It finds people who are, and who can manage their own lives while actually providing direction to society.
Just about every civilization on earth that ever rose beyond a simple agrarian level developed some of a sieve to find the people most capable.
Our current model is far from efficient, and far from the best, but I doubt you can consider it unjust. Its adaptive, self tuning, relatively unbiased (finally), conforms to the needs of society over time. Its too expensive, too rigid, wasteful, and a host of other undesirable things.
It's a sorting operation. It's a wheat from chaff sieve. And largely, the participants (students) themselves do the sorting, by making their own choices. When faced with the realities and requirements of being rocket scientists, most people choose something else. And civilization (and those who ride on rockets) are better off for it.
Discussion should abhor vacuity, as space does a vacuum.
(Score: 2) by dmc on Monday February 24 2014, @02:49PM
Umm... I bet the girls that didn't get promoted by the good-old-boy-ism of the system can consider it unjust. And I'd agree with them. I suppose they should be grateful they are even allowed to vote.(sarcasm)
(Score: 2) by frojack on Monday February 24 2014, @03:26PM
Good-old-boy-ism means only hiring those with degrees, and freezing out the highschool graduate from pharmaceutical research, engineering jobs, etc.
That women were given short shrift is not a problem of the college/university system. Its a problem of society in general.
Discussion should abhor vacuity, as space does a vacuum.
(Score: 2) by dmc on Monday February 24 2014, @03:35PM
Sorry, I guess I watched too much Dukes of Hazard when I was a kid, with the Good ol' Boys rad orange car with a confederate flag painted on it. I'm pretty sure Good-old-boy-ism has a long history of including racism against blacks, and sexism against women.
(Score: 2) by WildWombat on Tuesday February 25 2014, @02:32AM
I have a huge problem with your whole post and the mindset that created it.
The point of college should be to learn. Looking at it as just a way to show that you're wheat and not chaff is a huge problem. People learn just enough to pass and exam before they forget it all. They take useless courses just because they're easier in order to get the credits they need. They don't care about the actual learning, because the reason they're there isn't to learn, its to be declared wheat so they've got a shot at a middle class life. This is the attitude of the majority of people attending college, and it shows. They largely don't care about the actual learning.
And since you're basically required to get a degree to have that shot at a middle class life the gatekeepers to the sieve can charge exorbitant amounts, which they do. This burdens a significant portion of our society with crippling debt. Do our doctors and nurses and lawyers actually need their schooling? Of course. But far too many jobs require a degree that actually don't need one and that doesn't do society any good.
All of the above also completely leaves out that a significant portion of society is excluded from passing through your sieve because they don't have the funds to do so. So you mark them as 'chaff' and excluded from having any real say in our society. Excluding a large portion of your society from participating and having a real stake and say in society is NOT the way to make it stronger.
That whole outlook that if you don't have a degree you're the 'chaff' of society is terribly elitist and morally repugnant. Aren't plumbers helping maintain civilization? Aren't carpenters? Is everyone without a degree really so useless?
Cheers,
-WW
(Score: 2) by frojack on Tuesday February 25 2014, @03:40AM
It may be morally repugnant, to you, but lets be realistic. You don't want someone who had trouble passing high school, and flunked out of college as a freshman operating on you or your child.
All of that easy to talk, but hard to walk egalitarianism quickly falls by the wayside in the real world.
Besides, I believe your indignation is based on built in bias that you don't even realize you exhibit, namely, that someone not qualified to be an engineer, a surgeon, or a nuclear physicist is somehow useless. You seem to think farming is some how less useful to society than microbiology. You sound like being a great engine mechanic is a failure compared to someone than writing operating systems.
Selection for career paths is necessary. Might not be the way you think the world should be run, but let me clue you to a little secret: All men are not created equal !!! I know, right, who knew? My buddy Shaq was astounded to learn this.
Discussion should abhor vacuity, as space does a vacuum.
(Score: 2) by WildWombat on Tuesday February 25 2014, @04:41AM
--"You don't want someone who had trouble passing high school, and flunked out of college as a freshman operating on you or your child."
I specifically wrote that doctors need their schooling.
--"Besides, I believe your indignation is based on built in bias that you don't even realize you exhibit, namely, that someone not qualified to be an engineer, a surgeon, or a nuclear physicist is somehow useless. You seem to think farming is some how less useful to society than microbiology. You sound like being a great engine mechanic is a failure compared to someone than writing operating systems."
I don't understand how you could get that from what I wrote. Your post was the one denigrating farmers and mechanics and everyone else lacking a college diploma as 'chaff.' I was arguing that they're not chaff, that they're vital to society.
--"Selection for career paths is necessary. Might not be the way you think the world should be run, but let me clue you to a little secret: All men are not created equal !!! I know, right, who knew? My buddy Shaq was astounded to learn this."
Selection for careers is necessary. My comment was that with the exception of some professions such as doctors, college shouldn't be that selector. It makes ineligible the many bright and qualified people who can't afford college. It forces everyone who wants a shot at those jobs that don't require specialized schooling to attend four years of college and spend an exorbitant amount of money to do so. They must do so not because what they'll learn there is necessary for the job but solely to make themselves look better than some of the other people also applying for the job. That doesn't benefit society.
Your tone and sarcasm also seem to indicate that the complete misinterpretation and twisting of the words I wrote into something the complete opposite of what was meant was purposeful. Bad form frojack.
Cheers,
-WW
(Score: 2, Interesting) by DeathMonkey on Monday February 24 2014, @02:59PM
So which college is it that turns out these professionals you speak of instead of this other trash? Is there some special class? Does joining a fraternity make the difference? Special drugs? Casual sex? Parties? On credit?
Think of accredation as a standard, not a product. Some email clients are better than others but they should all talk SMTP. Just as some universities are better than others they must all meet some basic minimum requirements.
(Score: 4, Insightful) by monster on Monday February 24 2014, @01:01PM
I would suggest treating education as what it is: An investment towards the common good, and not some business that must give profits. If that means public funding, so be it (no, it doesn't mean communism).
It was not so much ago that millionaires of their time like Carnegie, Mellon and others knew that a good, affordable education system was also in their own good, not only because a cultured worker may perform his job better and be able to easily adapt to many tasks but also because they were able to remember being of a lower class and working hard to improve, unlike the new uberriches who, like the old world nobility, were born rich, were schooled among other rich people, took some classes and developed connections with other rich in some Ivy League college and afterwards went to work in their parents' or friends' corporations (take that, meritocracy!).
A good, affordable education system does wonders for upward social mobility. It's not only about education, it's about what kind of society we want.
(Score: 2, Interesting) by Nobuddy on Monday February 24 2014, @11:34PM
I disagree. When i went in to IT, there were no IT degrees.
none. anywhere.
You could be an EE, or a degree in mathematics, or business... And maybe have a digital/computer systems focus. Maybe... schools that has such were rare as hen's teeth.
So, to enter the field, you had to be self taught. I argue that NOTHING better prepares you for keeping your skills up to date than having to learn them on your own. Through the years I saw degrees form, and people start arriving with these degrees. And they knew nothing- if I was lucky. Most were so mal-informed and outdated that they were a negative overall benefit compared to hiring someone who knew nothing. And as I sit here teaching a recent grad how to be a sysadmin, I argue that this has not changed one iota in the 20 years interim. I'd rather teach some gamer kid how to do this job. At least he is more likely to shut up about what he has already learned and actually pay attention to what he's being taught.
(Score: 0) by Anonymous Coward on Tuesday February 25 2014, @12:51AM
This seems odd to me, since the first Computer Science degree in the US was offered in 1962... so does that mean you got your degree before that? Are you really over 70?
(Score: 1) by GeminiDomino on Tuesday February 25 2014, @03:43PM
Not all that odd, when you consider that a computer science degree has about as much to do with IT as an Astronomy degree has to do with crafting telescope optics.
"We've been attacked by the intelligent, educated segment of our culture"
(Score: 0) by Anonymous Coward on Tuesday February 25 2014, @09:39PM
Said by someone who clearly didn't study computer science in the '70s and '80s, before "IT" became all about networking PCs, setting up e-mail, file servers, printers, and antivirus. Back then, you had to understand both computing theory and how machines actually worked.
Before Token Ring, Banyan Vines and Ethernet changed the face of business computing, "IT" as we know it today didn't exist - so of course there were no degrees in the field.
(Score: 0) by Anonymous Coward on Tuesday February 25 2014, @11:11PM
A computer science degree has a hell of a lot more to do with IT than EE, mathematics, or business do. Funny how you left out that option.
(Score: 1) by Nobuddy on Wednesday February 26 2014, @09:27PM
That was no more applicable than an EE or mathematics degree. It was just an EE focused on digital design.
(Score: 0) by Anonymous Coward on Monday March 03 2014, @10:39PM
> It was just an EE focused on digital design.
Uh, yeah, digital circuits... those things computers are made out of?
Face it, the only "IT" that existed before minicomputers came along involved men in white coats plugging patch cords into panels, reading off blinkenlights, threading magnetic tapes etc. It's just stupid to say there "were no IT degrees then." Information Technology IS computers.
(Score: 5, Insightful) by Drew617 on Monday February 24 2014, @02:02PM
I left college after two years, did four in the USAF and then backed into an IT career. I've done decent work and have progressed in the last 8 years to a fairly comfortable place.
I used to think the same way about college, and for years I've been able to substitute experience for degree requirements. I'm a quick study and intuitive - I've been able to learn whatever I needed to on the fly. So far, lack of the bachelor's hasn't held me back from anything.
Have returned to studies in the past year though and am absolutely amazed at the gaps in my education. Stuff I wasn't even aware of because I didn't "need" it yet; some of it fundamental and some of it more technical.
It's been a very helpful experience, to be honest, if only because it's caused me to drop the "I already know what I need to know" mentality.
(Score: 2, Informative) by Daniel Dvorkin on Monday February 24 2014, @06:28PM
This is a hugely important point. Every self-educated person I've ever worked with has had huge gaps in their knowledge, and often been very defensive about it and unwilling to benefit from anyone else's "book-learning." And I'm not exempting myself from this; I started working as a DBA before I'd taken a single database course, and it took me a long time to get it through my head that yes, damn it, those professors with their fancy degrees and expensive textbooks actually knew a hell of a lot more about the subject than I did, and it would be greatly to my benefit to listen to them.
These days, I'm a bioinformaticist. We have to deal with this attitude all the time, from all sides--computer scientists, statisticians, and biologists are all terribly prone to assuming they can "pick up all they need to know" of the other disciplines with a bit of self-study. Those of us with formal training in all three know how incredibly foolish this is.
Pipedot [pipedot.org]:Soylent [dev.soylentnews.org]::BSD:Linux
(Score: 1) by Nobuddy on Monday February 24 2014, @11:57PM
I have a degree in electronics I have never used, that I earned through military educational system. I don't even put it on my resume anymore. If a position demands a degree, I can trot it out to meet that requirement- but seldom do they ask anymore once your foot is in the door.
Now, promotion from within in a large corporation- that is a whole other thing. 25 year's experience, kudos and awards running out your ears? Nope, we will pass you over in favor of this kid with 6 months experience and a degree who you are still spoon feeding his job. He's your boss now, fuck you and have a nice day.
(Score: 2, Informative) by migz on Monday February 24 2014, @11:15AM
Money existed before government. It's government that wants control of the money supply. Look at Zimbabwe. The government decided to print more money to pay it's bills, but did not earn it. So eventually nobody wanted the governments money. Why does anybody believe government being involved in money is a good thing?
Check out Ron Paul's book End The Fed.
(Score: 3, Funny) by morgauxo on Monday February 24 2014, @11:26AM
Any political or economic discussion is officially over the moment someone brings out Ron Paul.
(Score: 5, Funny) by TheloniousToady on Monday February 24 2014, @11:52AM
I think you've just invented a new variation on Godwin's Law. Well done.
(Score: 2, Insightful) by ArhcAngel on Monday February 24 2014, @12:01PM
-Mahatma Gandhi
Anyone who has never taken the time to thoughtfully listen to some of the things Ron Paul espouses is doing themselves a disservice. You may not agree or like the man but it would not be wise to discount him out of hand.
(Score: 5, Insightful) by Sir Garlon on Monday February 24 2014, @11:40AM
Well, probably Americans think it's a good thing because they've had ~200 years of success with it. Issuing and regulating currency has been a function of government since ancient times. It's "How It's Done." Any alternative that's proposed will have to demonstrate it's better than government-issued currency. Suggesting people are daft because they don't see the same urgency for upheaval in the financial system is probably not the best way to set about persuading them.
[Sir Garlon] is the marvellest knight who is now living, for he destroyeth many good knights, for he goeth invisible.
(Score: 2, Insightful) by migz on Monday February 24 2014, @12:16PM
Well Gold has outlasted governments as a medium of exchange. Indeed for most of those 200 years of supposed success of American government money, it was redeemable for Gold. But governments once they have convinced people that paper is just-as-good, they forget about the backing. Then government starts printing money / debasing the coinage. Then the currency becomes no good. Then the government falls.
Not my wish, its the lesson of history.
See Zimbabwe Dollar (Government is still going, but they using other peoples paper money!)
See Weimar Republic
See Fall of the Roman Empire.
(Score: 2, Interesting) by monster on Monday February 24 2014, @01:16PM
I thougth it was redeemable in gold or silver, not just gold.
The problem with these economic discussions is that it's too easy to focus in some extreme cases and forget about the rest. Yes, Zimbabwe was nasty. It would have also been if they were using the gold standard, since the backing is efective only when redeeming, but printing is "free". Weimar was also a case of not having anything to back your coin, but since they were required to pay big war reparations to France, they would have been screwed anyway. And the Roman Empire had many economic problems, although they were using the gold standard: You can say dabasing their coins was the cause of their fall as much as price-fixing (easy way to get support from the lower classes of Rome) or infighting (more civil wars than against foreign powers). And even after the western empire fell, the eastern empire managed to go on for another thousand years using similar coinage. But paper-money worked well in ancient China, for example.
(Score: 2) by mhajicek on Monday February 24 2014, @02:35PM
Zimbabwe is only one of many examples, and printing more money than you have backing for breaks the backing almost immediately, because people WILL call the bluff.
(Score: 4, Informative) by Vanderhoth on Monday February 24 2014, @12:29PM
Just a quick correction for you.
The US government doesn't print, issue or control money, the Federal Reserve [wikipedia.org] does. The Federal Reserve is a separate private entity, which the US government has a token say in, but no control over. A board of governors controls the Federal Reserve with the Government providing "advice".
"Now we know", "And knowing is half the battle". -G.I. Joooooe
(Score: 5, Interesting) by Thexalon on Monday February 24 2014, @12:53PM
There are at least two problems with this:
1. There's a good question as to whether humans have ever lived without any kind of government. Early humans lived in groups of up to 200 people or so, and those groups had leaders who had the authority to reward and punish people, which is the basics of what a government does. This matches what other current primates do as well: There are leader chimps who have the power to punish other chimps if they step out of line within the chimp group.
2. The earliest civilizations that we know of with money also had government. For example, Sumerians had a fairly complex banking and monetary system, but they also definitely had a government to enforce that banking system.
Because it is. The big things that government provides for the money supply:
1. Government, and central bank in particular, prevents wild fluctuations in the value of the currency through its control of interest rates.
2. Preventing counterfeiting, so that you know you're holding, say, 20 Euros or 20 Dollars rather than a worthless piece of paper that you think is worth something.
3. An inherent value to currency by demanding that the currency be used in transactions with the government. To pay a tax to the US government, you must pay them in dollars. If a person or organization gets any money from the US government, it will be in dollars. The inherent value is that if you don't cough up a certain number of dollars as part of regular taxation (or fines, if you are convicted of a crime), the government will eventually send armed officers to help explain things to you.
Yes, I know the US government could go massively into debt, inflate the currency like crazy so that you need $11 trillion to buy a loaf of bread a la Zimbabwe or Weimar Germany, but the fact is that it has never done so. And it almost definitely never will: Almost all politicians are on the take from very rich people, and hyperinflation is really really bad for rich people as well as poor people (remember, we've just made Bill Gates' entire fortune worth less than 1 loaf of bread), so those very rich people will do whatever it takes to prevent politicians from even considering that course of action.
Every task is easy if somebody else is doing it.
(Score: 2, Interesting) by migz on Monday February 24 2014, @01:23PM
(Score: 3, Insightful) by Thexalon on Monday February 24 2014, @01:51PM
All governments use force and punishments to enforce a set of rules of behavior. You can't get away from that: Even in a modern democracy, every single day police use force to capture people who want to avoid standing trial, and every single day prison guards use force to make inmates follow the rules of the prison. At its core, government is a claim by an organization or person to determine when and how force may be used among a particular population or over a particular area.
You seem to be equating "Sometimes might is necessary to enforce good behavior" with "Might makes right". If you've determined, for reasons that have nothing to do with superior force, that murder is wrong, and someone commits a murder and refuses to submit to legal judgement for that murder, does that not justify the use of force against the murderer to compel him to stand trial?
Every task is easy if somebody else is doing it.
(Score: 2) by mhajicek on Monday February 24 2014, @02:42PM
What one person calls murder another may call accidental death, self defense, or justifiable homicide. The one who makes the call is the one with the most power; the biggest gang with the most guns. The only difference between government and thuggery is the matter of scale and the pretence, illusion, and often belief, of righteousness.
(Score: 1) by Silentknyght on Monday February 24 2014, @04:25PM
No. I don't have time to distill years of philosophy study to elaborate on the proof, but your statement is a fallacy, and one of the earliest ones I learned about in my philosophical education (presumably, among the earliest everyone learns about).
Let's try this: You could make the argument that nothing exists except in the state for which it is perceived or defined (i.e., by us). I could make an argument that such is not the case. The whole "tree falls in the forest" bit. Extending that from "things" to "actions," an action (e.g., murder vs. accident) exists as it "is", not merely as it is defined by others.
(Score: 2) by mhajicek on Tuesday February 25 2014, @12:30AM
The events themselves are indeed as they are, but "murder" is a human concept. If it's so cut and dry, why would the same action with the same motivation be murder in one jurisdiction but self defense in another?
(Score: 2) by Sir Garlon on Monday February 24 2014, @02:25PM
Paying the taxes you owe would be a start.
[Sir Garlon] is the marvellest knight who is now living, for he destroyeth many good knights, for he goeth invisible.
(Score: 2, Interesting) by migz on Monday February 24 2014, @02:55PM
I pay my taxes. I use my vote, and withholding my productivity, to create pressure abolish this extortion, but I do pay it.
Your government has made promises in order to raise those taxes (e.g. Social Security). Then instead of using that money for the intended use they used it to do other things. So now a whole bunch of people are expecting to collect on something they spent their whole lives paying for, but the money is gone. And it's not just that money, the government has borrowed money based on taxes it expects to collect in the future.
Realize there are only two ways to get out of this mess, raise the taxes, or make the debts worthless (inflation).
Unfortunately government has grabbed this future money by selling Treasury bonds to pension funds (amongst others). So the inflation route will compound things.
Increasing taxes? I tell you what once I hit that top tax rate, I STOP WORKING. Why should I pay 54% of my earnings to government? They are just going to use it to enrich themselves and their friends, while telling the public the lie that it is for the benefit of the poor.
It's just not worth getting out of bed in the morning when you are a tax slave. Some other sucker can do the work. But the other suckers will also figure it out. Eventually productivity will get really low.
This is what happened in USSR. Why bother if no matter what you do, the politically well connected get richer, and you can't get ahead, no matter how hard you work?
This is bad news, either way.
How about for a solution, stop using tax money to enrich yourselves and your cronies. Stop programs that you cant afford, and come clean, that you cannot hope to meet those promises you have made (viz. social security, medicare, etc.)
How about stop trying to be the worlds policeman? Not that I mind (I like a lot of American values), but you can't afford it. Let the rest of the world sort out their own problems, or fail on their own terms.
(Score: 2) by Sir Garlon on Monday February 24 2014, @03:19PM
Sorry, didn't mean to put words in your mouth, but I took
to mean you're one of those jerks who refuses to pay taxes. But since you clarified you do pay your taxes (presumably to a non-US country, shocking as it is to realize they exist), then I've got nothing bad to say about you. :-)
Not *wanting* to pay taxes isn't obnoxious, it's normal.
[Sir Garlon] is the marvellest knight who is now living, for he destroyeth many good knights, for he goeth invisible.
(Score: 3, Interesting) by istartedi on Monday February 24 2014, @01:23PM
Some of your rebuttals to the radical Libertarian ideology
are good; but your last paragraph takes it a bit too far. Some
wealthy people actually benefit quite nicely from hyperinflation,
especially if they help orchestrate it. Those who see it coming
are well positioned to do things such as buy a motel for a few
gold coins, while most ordinary people suffer. Bill Gate's fortune
wouldn't be worth a loaf of bread under hyperinflation. The last
time I looked into this whole bloody issue, IIRC holders of equity
during the Weimar period lost only half their wealth. One is tempted
to think that stocks would retain their full value just as gold does.
The 50% haircut is due to the fact that businesses must manage the
monetary stress. It cuts into the bottom line, and may even cause
some of them to fail. Larger firms like Microsoft wouldn't fail
outright; but would have several bad quarters as they struggled to
manage the hyperinflation and engaged in unproductive activities such
as making sure that Excel accommodated humongous dollar values.
(Score: 5, Insightful) by Sir Garlon on Monday February 24 2014, @11:17AM
While TFA points out that banks failed due to lack of accountability, it does not explain how a new "web-enabled" banking system would avoid lenders pooling their resources and becoming new, big banks, re-creating the same moral hazard.
It's possible the author is right -- I am not an economist so I can follow but not fully analyze his claims. But even if he is right, for the transparency he says is necessary to arise, the public needs to understand how the system works and how accountability is enforced. Unless I'm missing something, TFA does not explain that. It appears that magic internet pixie dust will make everything better. OK, why?
My point, specifically, is that everyone understands how regulation can manage (not eliminate) the public risks inherent in the banking system, but how magic pixie dust will eliminate those risks is not intuitive to a non-economist. So I predict the public will prefer, indeed demand, regulation unless and until they can be persuaded that it's safer to rely on the magic pixie dust.
[Sir Garlon] is the marvellest knight who is now living, for he destroyeth many good knights, for he goeth invisible.
(Score: 2) by mhajicek on Monday February 24 2014, @02:46PM
Where can I buy some of this magic internet pixie dust?
(Score: 1) by migz on Monday February 24 2014, @03:28PM
I think I'm starting to see your sticking points.
With regard to regulation. You initially claim that you are unable to follow his claims since you are not an economist, yet you state that everyone (except you ;-P) understands how regulation can manage the inherent risks of the banking system.
Without the endorsement of Big Brother ^H^H government, the public cannot rely on faith in authority to give them a false sense of security. The risks are, as you state, not eliminated by regulation, I hold that they are not even mitigated. They risks are just waved away. This is indeed pixie dust.
I don't believe transparency is either necessary nor sufficient, though personally I would prefer it. The public doesn't need to understand the intricacies. They just need to know:
1. There is no guarantee, buyer beware
2. Accountability is those issuers who are fibbers go bust, and everyone holding that currency lose everything.
How is this for an intuitive explanation:
If you don't like the food at burger king, you can eat at mcdonalds, or the dodgey taco wagon that parks next to the dumpster, or anywhere else, heck you can even start your own gluten-free organic paleo-vegan restaurant. This is like private money. You choose. You take the risk.
If you don't like the food for inmates at Guantanamo bay extraordinary rendition facility. This is like government money. You don't have a choice.
(Score: 2) by Sir Garlon on Monday February 24 2014, @04:14PM
Sure. My point, to continue that analogy, is that most Americans like the Guantanamo food, so they don't see the problem. I am not claiming it's the best of all possible systems; there may be better out there, but I have little motivation to change. I am sure you would be quick to point out that just because most people like the Guantanamo food today does not mean they should trust it will be good tomorrow. To most Americans, that seems like a hypothetical risk. To Zimbabweans, I am sure, it's not just hypothetical.
[Sir Garlon] is the marvellest knight who is now living, for he destroyeth many good knights, for he goeth invisible.
(Score: 1) by Non Sequor on Tuesday February 25 2014, @12:58AM
You're on the right track.
For certain functions in society (accreditation and risk assessment), there is a credibility game that accompanies the function. If everyone who applies gets accredited or gets a loan, the accreditation becomes worthless or the loans end up defaulting. The game is that if the wheat is going to be separated from the chaff by some process, people want to bypass that process. There's an ongoing arms race between the function and the people the function is applied to.
Bypassing the function doesn't change the game, it just changes where the game is played.
i haven't looked at Kickstarter much to know the current state of affairs, but I suspect eventually there will be a demand for some form of credit ratings or for projects to be "cosigned" by people who have led successful projects before. As people get burned, the demands for more formalized vetting processes will grow.
At some point, an online accreditation program will pass someone who can demonstrate a strong knowledge of a single field but who has no functional skills in any other area. In response to this issue, committees will form to establish course requirements for different degrees and answer questions like if a massage class can be used as a humanities elective for an electrical engineer.
(Score: 4, Interesting) by beckett on Monday February 24 2014, @11:17AM
disclaimer: i own some bitcoins.
cryptocurrencies are a disruptive technology not because of their capacity for monetary value, but because it is a model for distributed trust [oreilly.com]. we currently use banks, paypal, visa, etc. as a form of escrow because we do not completely trust the person we're transacting with. even paying for something in cash depends not on the faith in the issuing government, but more pragmatically: are these $100 bills real or not?
the blockchain allows trust between parties in a way that was not possible before. A cryptocurrency blockchain like bitcoin's means we no longer need a middleman because the bitcoin protocol and its blockchain operate more transparently than a bank.
it is entirely likely that 100% of the world's governments will not approve or permit bitcoin to operate within their borders. However, it is extremely unlikely that 0% of the countries in the world will recognize bitcoin. the next 10 years will be exciting to watch.
(Score: 5, Interesting) by lubricus on Monday February 24 2014, @11:34AM
As an owner of bitcoins, could you answer a question (not trolling!)?
After all the coins are mined, what is the incentive to maintain the blockchain? Maybe I'm wrong, but as I understand it, the mining provides the computational power for maintaining the blockchain. When the monetary incentive disappears, what's to stop someone with access to lots of computers from corrupting the blockchain grabbing a "majority vote"?
... sorry about the typos
(Score: 1) by e on Monday February 24 2014, @11:41AM
Miners do not earn only the block reward; they also earn transaction fees. Bitcoin users choose their own transaction fees, and miners choose which ones are high enough to include in their mined blocks.
(Score: 2) by lubricus on Monday February 24 2014, @09:17PM
Didn't know about transaction fees. This thread has a lot of informative points, especially about the end game. I'm still having a hard time wrapping my head around the transaction fees. It seems like this sets up a situation ripe for exploitation. It seems like it would allow a few nefarious blockchain maintainers to manipulate the blockchain simply by setting their fees very low.
Not addressing you with this (addressing the thread parent), but this is the problem around the discussion around bitcoin. Techies seem to love the crypto component of bitcoin, but they seem to miss the problems. Sure, this seems to solver the Byzantine generals problem, but it requires independent generals. While there's money to be made, mining seems to assure a collection of independent generals, but when mining becomes more difficult, there seems to be a lot of mechanisms for collusion and subterfuge in the blockchain (even ignoring the size problem, exchange rate manipulation etc.) What would a functional (self correcting for collusion etc.) market for transaction fees look like?
... sorry about the typos
(Score: 1) by beckett on Monday February 24 2014, @10:46PM
i believe the transaction fee is built into the protocol, so someone would have to be nefarious enough to infiltrate the development team and change the TX fee in the source. since you can still compile your own wallet, i'm sure any changes would be tracked and discussed openly.
contrast this with the recent LIBOR scandal, that saw the US Fed and multinational banks manipulate the interbank lending rate [telegraph.co.uk], affecting consumer spending and market liquidity at a fundamental level. in the case of the LIBOR manipulation there was no source code, and there was little recourse. banks are still lending after being slapped on the wrists.
currently it is the sender's choice whether to include a transaction fee or not [bitcoin.it]. there is incentive for nodes to process the transactions that are paid, rather than the ones with no transaction fee. the current fee is 0.0001 BTC per 1000bytes of information. a typical transaction takes 500bytes, so almost everyone pays the 0.0001 BTC.
seems like a bit of a strawman. i find that most people that invest in an asset (company stock, savings bond, mattress) take little effort to learn about their investment. this has nothing to with bitcoin, and has everything to do with people's laziness. whether the investment is bitcoin, higher education, or $1000 on "santa's little helper" in the 3rd race: the same personality types end up gambling their money away rather than taking the time to research where they should put their money. you're describing irrational exuberance, which is a human failing and not exclusive to the "techies" that invest in cryptocurrencies.
(Score: 5, Informative) by beckett on Monday February 24 2014, @11:46AM
this is a really good question. the incentive to maintain the blockchain will be in the transaction fees paid out to the mining node that propagates a transaction along the chain. however, the last block to be solved (i.e. #6,929,999) won't happen until ca. 2140, so well after everyone except ray kurzweil has passed on.
by the time this occurs, bitcoin mining will have long moved out of the hobbyist basement and into the hands of corporations and governments. It is in interest of cryptocurrencies now and in the future to have an even, worldwide distribution of power-efficient mining systems (e.g. asics) to maintain the blockchain, and to avoid the rush of a lot of computers getting the 51%.
(Score: 2, Insightful) by len_harms on Monday February 24 2014, @12:19PM
I own 0 bitcoins. However, I watch it distantly.
what is the incentive to maintain the blockchain? None.
I predict when the 'easy' coins are finally mined. People will seek out other 'easy' coins to get free money. People do not want 'coins' they want value. In this case 'free' value for mining. You can see the fluctuations now. One exchange going out can send the exchange rate tumbling. It is a currency that is backed on perceived value. Most fiat currencies are based on this as well. However, I can not pay my taxes in bitcoin or buy food or whatever at my local store. I can only by law pay them in US Federal Reserve Notes. So bitcoins will only ever have value to me but only at the exchange rate.
Also being a fixed size currency you will also see other games played near the end. You will be able to manipulate the value of the coin. By doing 1 simple thing, hording coins. If I had the cash I could buy 100 million dollars in coin. This would immediately have the affect of causing the exchange rate to go up as supply went down. I could then sell you something at a higher coin rate. Then turn around and sell my 100 million in coin back into a 'safer' currency at a basically 0 lose (maybe even some gain as I ran up the exchange rate). I then have more coin than if I had sold to without the million dollar transaction. This is but a simple example of what could happen.
I could also play games if I am a government body of crashing out the currency by bouncing the exchange rate and getting people dislike using it. In other words attack the perceived value. I could burn cash to crash you out.
Most govs have a small bit of inflation to defer these two types of attacks.
Also if there is little to no inflation and high variability on exchange rate you will have a hard time with people wanting to loan out coins. As the person loaning it out does not know if they will get less or more back making it a very high risk loan. Loans are how our economy grows today. We borrow from future growth to buy that future growth.
(Score: 1) by Grishnakh on Monday February 24 2014, @12:59PM
Not only that, but what about inflation? Maybe I'm missing something, but there's only a fixed number of possible Bitcoins, and they get harder and harder to mine. Healthy economies require a currency where the money supply constantly grows, in order to avoid inflation (i.e., if the economy is growing, the money supply needs to grow with it). If you don't do this, you'll wind up with deflation, which is a very very bad thing.
(Score: 1) by sfm on Monday February 24 2014, @01:49PM
Bitcoin has an inherent limit, even if you ignore diminishing returns as more and more is created. This limit is large enough to allow Bitcoin to flourish for a time, but will eventually be limited. From there, they can either change the basic rules, or more likely, a new cryto-currency will take its place. Much easier, now that Bitcoin has proved the path.
Biggest downside I see here is any new currency will "grow up" in a time of far stronger regulation.
(Score: 1) by len_harms on Monday February 24 2014, @05:36PM
I 'skimmed' inflation a bit. Inflation is good or bad depending on what you are doing with money. If you borrow money you want inflation. We borrow vast sums of money. If you save money you want deflation.
With deflation you can actually stall out people wanting to buy things. As if they simply wait they can buy some positive multiplier of what you made (unless you recalc your price every second). The only people who would buy things are people that *must* buy. If they can wait they will. As to increase your fortune all you have to is let the clock tick. If the price of goods was perfectly priced (which is illegal) this would not matter. But we do not live in that world.
With no inflation money will move towards people who have it already becoming more and more concentrated. As the more you horde the more 'rich' you are. As the exchange rates go up.
(Score: 2, Interesting) by Grishnakh on Monday February 24 2014, @05:54PM
Right, and that's why deflation is so bad. It works against the economy; in a healthy economy, you want people buying and selling a lot of stuff. You don't want them hanging onto money, because that's economic activity that isn't happening. The more trade there is, the better off everyone is (as long as bubbles don't happen, of course, as we've painfully learned several times in the last couple of decades). Obviously, not saving any money is a bad idea for pretty obvious reasons, but in general, if everyone starts hording their money and not buying anything, it's bad for most everyone, because then companies go out of business, people lose their jobs, etc. The term for this is "recession". Deflation makes it worse since it rewards people for hanging onto their money, which prevents the society from emerging from the recession.
What you really want is inflation: it rewards spending money, which makes the economy healthy, and discourages hording money. But you only want a little bit of it. Too much inflation (hyperinflation) is really bad as Zimbabwe found out (and various European countries back in the first half of the 20th century), since the currency stops having any real value. A small amount of inflation is ideal, since it encourages spending, while not overly penalizing saving, and gives you a little buffer room to avoid deflation. It's similar to unemployment: zero unemployment is a bad thing; you always want a small amount of it, as it makes for a healthy economy (people need to move around between jobs, not stay in the same job forever), but too much is obviously really bad.
(Score: 1) by beckett on Monday February 24 2014, @10:30PM
this may or may not be true. certainly in the idea of free market economies this may be true, but also understand by keeping interest rates at 0% or lower, this already disincentivises a savings account, and encourages leveraged investments.
most of us live beyond our means and owe our soul to the company store. this is what a "healthy economy" with lots of spending, rather than instilling the ethic to save up for a rainy day, does to people. if you owe money on a mortgage you will not want to go on strike, and perhaps this type of compliance is exactly what people need from a dissatisfied underclass.
i'm not saying the economy is as simple as this relationship, but we should at least recognize there are benefits to saving, and people should be incentivised to save more than they currently do. with easy access to credit, someone can put themselves into financial ruin far quicker than their parents or grandparents could.
(Score: 2) by maxwell demon on Tuesday February 25 2014, @03:20AM
Is this really a necessity, or is it just a shortcoming of the current economic system? It seems to me that a system where everyone buys only what he needs (or really wants) is more sustainable than a system where everyone buys new stuff all the time. Indeed, a lot of the ecological problems come from our excessive consumption of resources, which is driven by people constantly buying new stuff they don't really need.
Or formulated differently: Is our economy really healthy when people buy much, or is it just addicted, and the negative effects of deflation are essentially withdrawal syndromes?
The Tao of math: The numbers you can count are not the real numbers.
(Score: 1) by Grishnakh on Tuesday February 25 2014, @12:25PM
That's a very good point. However the reality in our current economic system is that more consumption leads to more employment, and vice versa. Less employment means more unemployment, which means people suffering and starving. Maybe if we adopted a basic-income scheme this might be different as people wouldn't absolutely need to work to survive.
(Score: 1) by beckett on Tuesday February 25 2014, @12:36AM
those days are long gone. bitcoin is 5 years old, and over 50% of them have been mined.
. the only way to mine them directly is to use specialised equipment (asics), and there is a long waiting list and significant upfront cost.
what is interesting is the baseload of casual miners that also exist: people currently using usb-powered asics that are getting milliBTC a week. this is the 'long tail', or the 'casual gamer', and this persistent, distributed hash rate may eventually comprise some of the future blockchain nodes.
this may have been a stronger argument back in 2012. In 2014, $100 million in bitcoin isn't that special: there are 176,782 addresses that are holding $244million or more. each. [bitinfocharts.com] You can't push those guys around with a pathetic $100 million. I think bitcoin in 2014 is much bigger than you think it is.
The price fluctuates wildly because nobody can completely agree what a bitcoin should be worth. once everyone agrees that bitcoin should be worth $foobar is the day it can reach equilibrium. To me, this indicates there is currently a short-term opportunity with high risk. I am a conservative investor but i can currently afford to take an educated gamble on some bitcoins.
I am optimistic about the future value of 1btc. I don't claim to know what it will be worth in a month, a year, or a minute from now, but I think they will be worth more in 12 years than they are worth now. I certainly wouldn't recommend anybody spend money they couldn't afford to lose on bitcoins, but otoh i think everyone should consider a small amount of bitcoin if they understand and consider the risk.
If those were the only two ways to attack your spending power in a fiat currency.
with regards to the utility of bitcoin, cash cannot be backed up, and credit card companies attempt to choke off funding to places like wikileaks. every time a credit card company gets hacked [forbes.com] the consumer ends up footing the bill. The distributed bitcoin protocol also renders the entire Western Union model of business obsolete: imposing onerous service charges for people to shuffle around a bunch of virtual dollars from one person to the other.
a variety of bottlenecks in the distribution of music, video, books, and research maintained the silos and paywalls for years. these obsolete models are currently being torn down by a civilisation making the shift to online, peer-sharing approach to media. why should it be unreasonable to expect the same thing to happen to money? we may need to use a bank now, but maybe not in the future.
(Score: 1) by len_harms on Tuesday February 25 2014, @11:15AM
I think bitcoin in 2014 is much bigger than you think it is.
I made up a number. What you are telling me is there are people out there who hold huge sums of coin and could manipulate the exchange price. Right now they have no incentive to do so as it would hurt their value. What happened if a rouge state got a hold of one of those chains? Or some guy decided its just bits and worthless to him and he just wants to troll everyone?
If those were the only two ways to attack your spending power in a fiat currency.
Most ways of attacking a currency involve attacking the credibility of the money. like this we may need to use a bank now, but maybe not in the future. The upside to cash is I do not care about the history of the dollar I hold. Its value is immediate and no baggage other than space. A coin chain requires an exchange to validate the transaction.
the consumer ends up footing the bill.
That would be no different in the bitcoin world. Do you think people will stop loaning money out? Bitcoin is a holder of value. Not a magic way to fix fraud.
I am optimistic about the future value of 1btc.
Good for you. I am not. I see it as a classic speculation bubble. The middle game looks all roses until it pops. For example 1/5th the value was lost in the past 24 hours. That may come right back or spend months getting there. You do not know. People who invest in that sort of reckless way end up broke or wildly rich if they happen to guess the right time to get out. No one can see the future...
You may have 0 real dollars in (aside from power costs). As you may have mined it yourself. Or you have 'invested' in it by buying asic hardware.
People were pumping money into .com companies right up until that bubble burst too. To use a recent example.
I have by using sound investing techniques turned my money into 5x what I started with. The bitcoin screams stay away to me. Oh I will watch from the sidelines though.
http://qz.com/72118/yes-people-are-hoarding-bitcoi ns/ [qz.com]
At some point the hoarders will realize they have bits on a disc and will want to buy cars/houses/etc with it... US dollars is just paper until you spend it... You are seeing the value of your coin go up because everyone is holding on. Dont be the guy who is holding the bag. Hope you make tons of $. Do not worry about maximizing profits as you can not see tomorrow. Sell and feel good about the amount you made for 'free'.
http://blockchain.info/charts/market-price [blockchain.info] .com futures. And calling it a different world. The market reminded everyone about the average.
Last time I saw graphs like that people were investing in
(Score: 4, Interesting) by Anonymous Coward on Monday February 24 2014, @12:03PM
In the current system, the only ones who can create money are the banks (yes, every bank creates money, not just the central banks; it's just that the central banks regulate the amount of money the other banks can create; that's basically the core of fractional reserve banking). So you cannot replace banks with market places without changing the monetary system, or your money will simply vanish (literally, because money is created by banks giving out loans; as soon as those loans are paid back, the money created that way vanishes again).
Now you cannot simply allow everyone to create money that way for the same reason you cannot allow everyone to print their own banknotes: This would cause massive inflation. Therefore replacing banks with market places would only work if at the same time the monetary system is changed away from fractional reserve banking. Which is a political change, not a technical one.
(Score: 3, Interesting) by migz on Monday February 24 2014, @12:43PM
If the banks can create money out of thin air, why should individuals NOT be allowed to? Why do banks get a special license to print money from the king, but the plebs are locked up for forgery if they do the same?
Your inflation claim seems to be a bit of a straw man. Sure those who are dishonest, and profligate with their home-made money will soon lose value (inflate). However those who choose to Sheppard their currency, possibly by making it redeemable for a recognized commodity (viz. gold) would gain credibility as a medium of exchange. Ideally this could be non-fractional, but that would be the issuers responsibility, and the users choice.
The need for political endorsement is a weak one. I live in a country that had some very funny laws on the books (apartheid) and the politics were forced to change by reality.
So called black market currency will grow once government backed currencies lose credence.
It's a scary thing for people who have misplaced faith in government to monopolize this important function. I'm not saying that there is no place for government, but like separation of church and state, money needs to be de-politicised. At this level economics is like physics, it's inevitable, and no amount of wishful thinking (viz. politics) can make things fall up.
(Score: 4, Informative) by starcraftsicko on Monday February 24 2014, @01:47PM
Lots of people don't understand fractional reserve banking. I barely understand it, but I'll share what I know.
You have some money. For the sake of discussion, I don't care if it's metric pounds of gold or paper notes. Let's say it's $100 for now. You give it to the bank. The bank agrees to hold it and let you collect it later and to let you write notes to people (checks) that can be redeemed for some of your money. The bank doesn't just take your money and lock it in a vault (any more....), it loans it to me.
I want to buy a house. The bank agrees to let me pay back over time, but gives me the whole sum now. I pay the money to the person who has the house. Guess what he does with that money... he puts it in the bank. A magical thing has occurred - You have $100 in the bank, and so does that guy I bought the house from. The same $100, counted twice. And the bank can lend it again. So $100 becomes $200 becomes more... and it's all (relatively) honest.
The system I've described is 0 reserve banking. It is entirely possible that you could write a check for $5 for blow and that, when the check is presented to the bank, the bank could have no money because I am in the midst of the house transaction I mentioned. When this happens and the bank can't pay, it's bankrupt - a big friggin' mess.
Where the 'King' in your complaint come is is that he makes some rules (Do this or my royal thugs will lock you in a small cage!) to ensure that your checks for hookers and blow can be cashed. He may make the bank buy insurance (FDIC), but additionally, he requires that the bank keep on hand some fraction of your original deposit at all times. This prevents many bankruptcies, and also serves to put an upper limit on how much money banks can "create". In practice, the 'King' changes this percentage from time to time to try to control the money supply.
Why can't you do this? You can. But there a lot of things you have to do before the King will give you that insurance. And without the insurance, nobody trusts you... or at least they trust you less than the bank down the street with FDIC.
Someone else has to do the car analogy.
(Score: 1) by scruffybeard on Monday February 24 2014, @02:50PM
Your description of how the system works is right. The article rambled too much for me to understand it, but the author generally asserts the premise that banks are dead, and everything can be crowd sourced. How the heck am I going to crowd source the loan on my house or my car? Do I list 1000 creditors as having a lien on the title? What recourse does someone have if I fail to pay them back, meaning will it be worth it to them to take me to court over the $100 they loaned me so I could buy a $40k car? I believe that technology will change how we interact with banks, and perhaps some of their functions, but they are going to be around for a very long time.
(Score: 3, Insightful) by maxwell demon on Monday February 24 2014, @03:51PM
There's another aspect to this: Often you hear that fiat money is not backed with anything. But that's not really true: If the bank gives you a loan, they usually demand a security, that is, something they can get if you can't pay your loan back. For example, for a mortgage they'll have your house as security. If you cannot pay the money back, they'll take your house instead. That is, the money created by your loan is ultimately backed with the house you've bought with that money.
The Tao of math: The numbers you can count are not the real numbers.
(Score: 4, Insightful) by Thexalon on Monday February 24 2014, @12:03PM
How exactly does technology enable student accreditation? If you're thinking that you can have students quietly sit in the comfort of their home and take tests, the problem is that anyone who really wants the accreditation but doesn't have the skills will just hire somebody else to take their test, making the accreditation worthless. The human element is necessary for verifying that somebody is as familiar with the materials as they say they are.
Good commercial banks and credit unions provide some very real services, in some cases with the assistance of the Evil Government (TM). The most important services are, in a nutshell:
1. Temporary holding of highly liquid assets in deposit accounts that are guaranteed to lose value no faster than inflation. Right now, Bitcoin exchanges can hold assets, but can't guarantee against a loss of value the way an FDIC or NCUA insured savings account can.
2. Management of a ridiculously huge number of financial transactions - you'll probably do a half-dozen or so today without thinking about it. Bitcoin exchanges can conceivably do that.
3. Risk evaluation when making loans. Bitcoin exchanges have absolutely no way of managing that right now.
Until Bitcoin has universal deposit insurance, a stable-enough value, and good risk management, it cannot replace commercial banking. It's as simple as that.
If you look at how people are using Bitcoin, there are basically 2 big camps right now:
- Those who use it as yet another foreign currency exchange.
- Those who use it as a replacement for suitcases full of cash for illegal transactions (money laundering, drug purchases, etc) thinking that it will prevent them from getting caught. This is turning out not to be true.
What I'm not seeing are people using Bitcoins extensively for either wealth storage or everyday transactions.
Every task is easy if somebody else is doing it.
(Score: 1) by starcraftsicko on Monday February 24 2014, @12:47PM
You've just reduced the role of higher education to that of a careful exam proctor. It does seem to me that it should be possible to accomplish this for less than $50,000-$100,000 per student.
(Score: 3, Interesting) by gallondr00nk on Monday February 24 2014, @12:07PM
The model the author works on hinges on the fact that the banking sector creates, rather than eliminates risk. Yet, if the sector is bailed out at every opportunity, how is there any risk? In individual part of it may collapse, but the sector itself remains intact.
Yet the sector is so collosal that failure to bail it out would have wiped out a large percentage of the money supply. Positive Money [positivemoney.org] estimates that in the UK banking generates around 97% of the money supply.
I'd agree with him so far as to say that a money supply that is created as instant debt in unsustainable. Back in ancient Sumeria, the original inventors of permanent debt peonage, they had a jubilee every 70 years as without it the economy would collapse. Proposing such a solution now would seem hopelessly radical. Since we've done nothing to address the conditions leading to the 2008 crash, it's inevitable that we'll witness another reasonably soon.
I don't see a convincing argument in the author's statement that technology will bring that system down. We already have the means for decentralised currency exchange, along with some small sites that allow us to lend and borrow money without the banking system. What precise method would one have for avoiding deflation? Who would control issuing new currency? If it was through a Federal Reserve type structure, who would receive it? What great new technology would lead to a surge in p2p currency exchange?
I'll share my own leftfield solution. If the problem is that most wealth is created as debt through banking, I would combat that by instead dividing all newly issued currency throughout the population at large at no interest. The fiat currency would stay, but fractional lending would be abolished.
Inflation could be controlled by the amount in circulation, roughly the same as it is now. It would give people a guaranteed income in an age where automation is reducing our need for labour. It would stimulate consumer spending in an economy that relies on it. It would eliminate survival anxiety for a great many people who are currently in poverty, and the suffering caused by spending an entire life on a debt roundabout. People could group together to borrow, lend or invest money.
Something needs to change, as our current system is little more than a snake eating its own tail.
(Score: 1) by G-forze on Monday February 24 2014, @12:41PM
This is a problem that I seldom see discussed even though the newspapers nowadays seem to be filled with articles stating "Technology will eliminate our jobs!". The problem is not that automation is making goods cheaper to produce, but that the savings are not being distributed among those that formerly benefited from the revenue (i.e. the workers), but stays at the top which gets ever richer while the workers are laid off. I see no way in which the market forces will correct this shift in power, and am afraid that some kind of central planning will have to come into play. Perhaps as you suggested, through a central authority taking over the creation of money, or through heavy taxing of those making their fortunes using automation.
Anyway, we will soon have to realize that the days when every respectable citizen had a 9-5 job are gone, simply because there will not be enough such jobs for everyone, and that some kind of citizens' salary will have to be instituted to compensate. This will have the added benefit of letting people do what they like and are motivated to do, instead of what job they happened to find, which will lead to much inventiveness and creativity. I also expect things like hand crafted goods will become much cheaper, as people see their hobbies as extra income and not something you have to live of.
(Score: 0) by Anonymous Coward on Monday February 24 2014, @01:41PM
70 years between jubilees? I had heard 7, making it relevant to debts that aren't multi-generational. Maybe that was a different culture though.
I like the idea of distributing new cash to the populace rather than the banks, it helps to offset the disproportional impact of inflation on the lower classes, gets the money into circulation faster, and maximizes the economic benefit by stimulating the "economic headwaters" (since as a rule money flows uphill).
(Score: 4, Insightful) by Desler on Monday February 24 2014, @12:12PM
Haha what? There's no way in hell I'd trust my money to places like Mt Gox or any bitcoin exchange. Banks and bankers are universally slimy but these amateur-run bitcoin exchanges are a complete joke. You might as well just flush your money down the drain since you'll accomplish the same thing.
(Score: 2, Interesting) by bill_mcgonigle on Monday February 24 2014, @12:24PM
Banks and bankers are universally slimy but these amateur-run bitcoin exchanges are a complete joke. You might as well just flush your money down the drain since you'll accomplish the same thing.
So if JP Morgan ran a bitcoin exchange, you'd use it?
These sorts of things will happen eventually - I'm curious where your line of discrimination is.
(Score: 2, Insightful) by Desler on Monday February 24 2014, @12:31PM
Without FDIC insurance, heavy regulation, etc.? Hell no.
(Score: 1) by Desler on Monday February 24 2014, @12:35PM
I should append to that, I'd still not use anything from JP Morgan even with those conditions in place, but those would be the only conditions under which I'd even remotely consider using some bitcoin exchange.
(Score: 2, Funny) by Buck Feta on Monday February 24 2014, @12:34PM
>> flush your money down the drain
So you investing in DrainCoins then?
(Score: 0, Flamebait) by Phoenix666 on Monday February 24 2014, @12:23PM
There are a couple more specific realms posited in the article, banking and education, but I'll pick up the larger question of technology as a means to disrupt vs. preserve the status quo. The Internet has democratized information, of course. And industries that have traded on control of information are sliding into oblivion; we've all been watching that happen and talking about it for 20 years now. The next step that's dawning is the democratization of physical production. Drones, robotics, 3D printing, and the Maker movement, piggybacking off the Information Revolution, are driving hard to put the power of a self-actualized world into all our hands. And when you cast your eye along the arc of what's occurring, it rather looks like what we are actually witnessing is an incredibly huge sea change from a centralized, 19th-century mode of production to a massively distributed one. For me the NSA mass surveillance, general erosion of democratic checks-and-balances, and accelerated looting of our public and private wealth indicate a rear-guard action by the keepers of that 19th-century status quo as it sunsets.
(Score: 3, Insightful) by chebucto on Monday February 24 2014, @12:24PM
Tell that to your accountant.
Or, try and do your own accounting. See how long you last until you violate the tax code and/or get audited.
Some parts of accounting have been computerized, but knowing and interpreting transactions and relevant laws remains the domain of human experts.
(Score: 3, Interesting) by gishzida on Monday February 24 2014, @01:18PM
What is with these "anarchist libertarian" fabulists?
The assumption that a private, unregulated transaction will be better / safer / cheaper than a public, regulated one is incorrect. The problem with the current system is that it is not regulated enough. The problem here is that the "libertarian fabulists" [Koch Brothers anyone?] are in fact social Darwinists. They fail to understand the idea that civilization is built on a social commons. They refuse to accept they have an obligation to maintain the social commons for when you destroy the commons you are destroy the civilization.
The fabulists say that when you eliminate this or that or the other someone will step forward-- Nobody is going to step forward to take up the slack except an opportunist to charge you through the nose or a public institution being forced to raise tuition and service fees or a "religious charity" that will refuse to serve certain people because they are "sinners against God's Word".
The cost of a four year degree in California 50 years ago was something like $10,000. Not so anymore, eh?
The question you should ask is: why? Who financed the deregulation of various industries? Who bought your elected representatives? Where did the money go? Why are you stuck in peonage? Simple: The very people that are selling this "Anarchist-Libertarian-Capitalist" fantasy are the ones that have profited by your peonage. By supporting them you are supporting a Cyberpunk Future of techno-peons.
good-luck with that.
(Score: 1) by quitte on Monday February 24 2014, @04:23PM
Colleges do not only exist to educate students. They also and equally importantly exist as a place somewhat independent of economic and political influences doing research. This should not be forgotten and be demanded of colleges.