Bitcoin raises some interesting questions. One is whether it might undermine the modern state -- which, for many of its libertarian-anarchist advocates, is the whole idea.Bloomberg
Bitcoin Really Is an Existential Threat to the Modern Liberal State
Evan Soltas
(h/t Lambert Strether at Naked Capitalism)
17 comments:
The sudden surge in bitcoin commentaries is a function of the parabolic nature of the bubble. When it collapses the news will relapse.
It's just like any other financial/real estate/commodity bubble. As the bubble peaks the exposition to bombastic news increase.
Bitcoin is just commodity money, like there are many. And if it posed any threat to the status quo, it would be easy to undermine or control it (not that it is).
What's the big deal.
All governments have to do is require citizens to report their incomes accurately to the government, and then to access taxes on those incomes in the currency of the government's choice. If someone is using a "crypto-currency" to conduct transactions, then they are shielding part of their income from the government.
Ignacio, I don't think bitcoin is commodity money. The bitcoins are not themselves a commodity, and there is no contractual redeemability fo bitcoins into a commodity. Bitcoins are just a conventional medium of exchange: the only reason people have for accepting them in exchange for goods and services is the confidence that others will then accept those bitcoins for goods and services. Purely conventional media of exchange can exist, and survive for some time, but without any apparatus of law, contract and enforcement buttressing the currency and stabilizing it, its usefulness and social desirability for most transactions and savings will be limited.
What's the big deal.
Evan notes in the post, the cat is now out of the bag on digital currencies. Bitcoin is only the first experiment. This is a phenomenon that is here to stay and it is still in its infancy.
Bitcoin does present a challenge to governments, as does cash. Previously the black market has been run on cash and for the big guys, money laundering. See the scandal involving HSBC where the US justice department just blew off the laundering. It's well-known that the big banks regularly launder huge sums, but they charge fees to do it.
Digital currency avoids the inconvenience of cash and the laundering fees and possible exposure. As a black market tool, digital currency is here to stay due to its advantages over present financial instruments, especially cross-border.
Bitcoin is already operating successfully as a black market tool, e.g., illegal drug sales and tax avoidance. The question is whether and how far non-govt digital currency can break out of the black market as the predominant use. That remains to be seen.
Bitcoins are just a conventional medium of exchange: the only reason people have for accepting them in exchange for goods and services is the confidence that others will then accept those bitcoins for goods and services. Purely conventional media of exchange can exist, and survive for some time, but without any apparatus of law, contract and enforcement buttressing the currency and stabilizing it, its usefulness and social desirability for most transactions and savings will be limited.
What drives the value of Bitcoins now is that they are accepted in exchange for contraband goods on the black market. This is what the alternative is designed for. The question is whether Bitcoin or another digital currency can find another driver that would allow it escape from being chiefly a black market currency.
Tom, even if people find all sorts of things to exchange for bitcoins, the problem is that it's a currency that just floats in the air of convention on clouds of pure confidence. There is no way it will ever be as reliable and stable as government currencies, so it is hard to see what advantage it confers for its users - except for its crypto nature which makes it good for illegality.
Clarification: By commodity money, I mean that it behaves more like 'commodity money' than an actual currency.
yep, it's a simple mean of exchange, as there are many. Lots of them are used to operate aside of the law, as bitcoin can be used. Actually bitcoin can be easily 'shut down' and controlled if it become a big deal, whereas other forms of 'black market money things' are harder to control in reality.
I still don't see what the big deal with bitcoin is (it isn't either the first form of 'digital currency'). What i see thought is that the price has gone up $40 in the last week. I rememebr a couple years ago when it went parabolic up to >$30 back then before collapsing, all the same sort of news where all over the internet.
Also is hilarious to see the virtual battle between gold bugs and bitcoin miners, who has more vested interests in their respective "goods" while they all cash out in dollars and euros.
Dan, presently cash is used for tax avoidance on a pretty massive scale. But cash is difficult to trasport across borders in significant amounts without risk. Money laundering fills in the here. I think you may be underestimating the scale of the market here. It's on the leve of trillions measured in USD per year. Cash and money laundering are difficult for governments and Interpol, etc, to track. Digital currency could be more difficult to monitor and control without draconian measures.
Governments are limited by what the populace will put up with. The US govt is going to have to throw in the towel in the war on drugs soon, for instance, as more states climb on board as it comes politically popular on the one hand and expensive to enforce when jail time is included.
Prohibition never works if it doesn't have popular support.
"The US govt is going to have to throw in the towel in the war on drugs soon, for instance, as more states climb on board...'
That will then probably cause a big collapse in the bitcoin value...
rsp,
"All governments have to do is require citizens to report their incomes accurately to the government, and then to access taxes on those incomes in the currency of the government's choice. If someone is using a "crypto-currency" to conduct transactions, then they are shielding part of their income from the government."
Maybe citizens will report their incomes accurately if the government asks them nicely?
"....even if people find all sorts of things to exchange for bitcoins, the problem is that it's a currency that just floats in the air of convention on clouds of pure confidence."
Monopoly money is not a confidence game?
"The US govt is going to have to throw in the towel in the war on drugs soon, for instance, as more states climb on board as it comes politically popular on the one hand and expensive to enforce when jail time is included.
Prohibition never works if it doesn't have popular support.
Just wait until cancer patients and their families learn more about how cannabis may prove to be a cure for cancer.
http://www.youtube.com/watch?v=Hy66MUZP538&list=PLwBs_ihArc1lCYDym-DH4EsDMR_UMTtA6&index=59
Just wait until cancer patients and their families learn more about how cannabis may prove to be a cure for cancer.
That's already happening.
In its witch hunt for "illegal substance with potential for abuse" the govt has brought research and testing of potentially valuable medicine to a virtual halt, and it has created fear in the medical profession of adequately prescribing pain medication.
For "moral" reasons.
This is going to change, and when it does the change will come quickly.
"In its witch hunt for "illegal substance with potential for abuse" the govt has brought research and testing of potentially valuable medicine to a virtual halt, and it has created fear in the medical profession of adequately prescribing pain medication.
For "moral" reasons.
This is going to change, and when it does the change will come quickly."
Maybe an opportunity to short Big Pharma?
Maybe an opportunity to short Big Pharma?
I think that what is likely going on now is the discussion of how to deliver it to Big Pharma instead of DEA. Call it "privatization" if you will.
"I think that what is likely going on now is the discussion of how to deliver it to Big Pharma instead of DEA. Call it "privatization" if you will."
Yes. My cynical and pessimistic side agrees with you that MM will not really go mainstream until Big Pharma brings it mainstream. However, my optimistic side says that this is a naturally occurring organic plant that people can cultivate on their own like they do with tomatoes. Can Big Pharma patent something like that?
They will do what they with all medicinal herbs. Extract the active ingredients and standardize the dose, and then do the required testing for FDA approval. That's how the medical-pharma industry works.
"The sudden surge in bitcoin commentaries is a function of the parabolic nature of the bubble. When it collapses the news will relapse."
Ahhh..... but what if it's different this time? ;-)
Ed, if Bitcoin shows that digital currency has legs, TPTB will try to either suppress it if the deem it disadvantages their rent-seeking, or else take it over if they can reap rent from it. That's their M. O. after all. Should be no surprise.
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