[jpdoctor]

> The more people get excited about faster ways to hoard bitcoins

People seem to be oblivious to the fact that a currency must be available in order to be useful. There is a reason that Gresham's Law has achieved "Law" status.

Oddly, the right thing to do for currency acceptance would be to shutdown all of the ASICs.

[pseudonym]

I think people are more oblivious to the fact that a "deflationary currency" is inherently flawed because it by definition results in hoarding, which is not what you want people to do with your currency. Why would you bother loaning or investing it if you can make more money just sitting on it?

[fleitz]

If USD was limited to currency in circulation then it would not be nearly as inflationary as it is.

Once an established lending system based on bitcoins is established it will have the same problems as our current currencies. It wasn't printing money that caused the real estate bubble, it was the way to banking system has the power to expand credit and the systemic risk that expansion of credit causes.

Once there are fractional reserve bitcoin banks it will no longer be a deflationary currency.

[wintersFright]

Will people want to borrow in defalationary biased currency though? Better to borrow in Bernanke Bucks where there is an unstoppable torrent being emitted monthly.

IMHO the Real estate bubble was from the Fed bailing the prior tech bubble by suppressing interest rates - which encourages borrowing. When loans are paid back, the currency created by taking the loan is extinguished but they have been juicing the system by continually suppressing rates via QE/bond purchases and not letting the real market decide the risk (ie: price of bonds). Now that interest rates have hit the floor - the next bubble to pop is the USD itself.

[fleitz]

If the USD pops then BTC may be less deflationary. The bubble did not pop because mortgages were paid back.

Loans are generally repaid in currency, paying back a loan creates even more currency as the additional currency created by the interest becomes an asset against which loans can be issued.

[XorNot]

The idea the USD is going to collapse is farcical. It would be a global catastrophe of a scale not yet seen, but also not threatened.

Meanwhile, BTC gains and loses 50 - 80% of its value in a single day. I wonder which is more stable.

[dualogy]

> It would be a global catastrophe of a scale not yet seen, but also not threatened

It would have been in the 70s -- which is why USD support has remained despite the Nixon shock for a few more decades. By now, most central banks and governments are increasingly, dare I say "prepared" or slowly preparing for the possibility without it impacting their economies or trade too badly. Nobody wants to see the USD fail or die --- but day-to-day economic / monetary policies on US soil should become less and less of a rest-of-the-world economic worry, concern or impact compared to previously.

Now, the last remaining problem is savings of millions tied up in USD promises worldwide. Still a big problem, and rest assured the USD will continue to get "support" to the proportion that these savings haven't "migrated" over to "something else" yet.

Anyway, one day all these notes the US has been "exporting" globally for many years will come home one way or the other. Hope the new cash supplies won't, ahem, "overwhelm" a struggling domestic economy at that time, shall we?

[wintersFright]

Agree BTC is way too unstable but being the the best nag in the glue factory doesn't mean much.

USD collapse would certainly be a far reaching global event but that doesn't mean it will not happen. I'm sure all prior entities with reserve status also thought their position unasailable.

http://www.zerohedge.com/sites/default/files/images/user5/im...

Global support for it is waning. China is doing direct currency swap deals and is no longer supporting USD by stacking treasuries at the rate it was. Russia is dishoarding treasuries too. The current trade deficit is propped up by the Fed buying USG bonds and suppressing interest rates. USD is not long for this world in its current form.

[jacquesm]

> The idea the USD is going to collapse is farcical. It would be a global catastrophe of a scale not yet seen, but also not threatened.

In the short term you are probably right. In the long term you are almost certainly wrong.

[wintersFright]

I see your point - the principal is repaid but the interest stays in circulation.

Agree mortgages didn't pop due to being paid back.

[zurn]

Deflation is not desireable in itself, but it is not a crippling disadvantage. Eg Japan has had a very long deflation spiral and it didn't affect the usability of their currency. And the west has been living in a world of negative real interest rates since the 2008 crisis.

As long as we don't have a big bitcoin credit market and we don't want to regulate the bitcoin "printing press" to adjust for market cycles, it won't even be a disadvantage. = As long as it's only a secondary currency to most users.

[fleitz]

Why does the method of mining mean that a currency should not be accepted?

Gold serves as a currency yet the methods of mining have changed drastically in the last 1,000 years.

[anigbrowl]

Gold fell out of widespread use as a currency after the mining became industrialized. Nobody wants to play in a rigged game.

[fleitz]

Tell me more about how gold fell out of use as currency because mining became industrialized.

http://en.wikipedia.org/wiki/Bretton_Woods_system http://en.wikipedia.org/wiki/Executive_Order_6102

I'm not a gold bug and I see many problems with using gold as a currency, namely that the amount of currency in circulation should depend on how much stuff we can dig out of the ground. (In the case of BTC something about how many times a SHA-256 hash can be calculated.)

The idea that gold fell out of use as currency because of industrialization is either a completely new discovery in economics, or completely wrong. I'm pretty sure it's the latter.

[anigbrowl]

I don't think the Bretton woods system counts. That's between countries, I'm talking about everyday preference for gold by individuals. I suppose I should have said specie instead.

[dualogy]

> Gold serves as a currency

Not for the last 80 years it hasn't..

[wintersFright]

Actually 39 years. The USD was a token for gold until Nixon shock.

[dualogy]

Yeah but that I define as "monetary metal for Central Bank settlements" gold, not "day-to-day normal-people transactional currency". Was it still "money" / monetary after 33? Certainly, until '71 (42 years ago, not 39). But "currency" (circulating to facilitate/lubricate individual micro rather than macro exchange&trade)? Hardly ;) Also not "legal tender" -- as in, for courts enforcing contract liabilities or tax payments.

TL;DR: only outside the US, only to Central Banks.

[wintersFright]

Interesting point. Wouldn't an individual Frenchman see a USD as a token for metal until the shock? And until the shock, national currencies circulated at a fixed exchange with the USD - thereby his own currency was effectively gold backed?

At a national level, yes the Central Banks settled in gold, but that was after the micro transactions bubbled up to be settled from the commercial banks and then eventually cleared at the Central Bank level (Talking on the edges of my understanding here - just trying to see if the reality for an individual level was the currency was gold backed until 71).

[dualogy]

> And until the shock, national currencies circulated at a fixed exchange with the USD - thereby his own currency was effectively gold backed?

Yes, "effectively gold-backed" until the first guy came along to openly demand an actual physical (rather than "potential") exchange of USD reserves for real ounces, in size, from the US. Bam, Nixon shock. Essentially "caused" by one "individual Frenchman" (de Gaulle) testing whether the system can in fact, in size and in physical actuality consistently deliver what it promised to the world.

[zwily]

The same number of coins will be mined, no matter how many ASICs are online.