Topic: 10 reason why BTC is better than the Fed Reserve (Read 1711 times)

Greetings all,

To begin, I'll state something that is probably rather obvious to any of you who talk with anyone who is not a bitcoin enthusiast:  

There is a disconnect between those who are well-educated in digital currency technology and those who are well-educated in economics.

For the past several months, I've been trying to reconcile this concept of digital currency with a few economists.  In general, the prevailing view I am met with initially is that bitcoin is a fundamentally disruptive technology (I don't disagree) and that it fundamentally runs contrary to the government and central bank (I do disagree).

Now, most of you are probably, at least somewhat, anti-government, anti-banksters, or at least anti-oppression and anti-corruption.  This is all well and good, I don't intend for what I present here to run against the community tendency towards Libertarianism, or to be political in any respect.  This is purely an academic model to demonstrate the case, not to necessarily advocate for any political agenda, policy decisions, or community action.

I assert that the innovation bitcoin brings to the table can help to promote economic activity and growth on a widespread scale without diminishing the central bank's capacity to maintain policy goals.

Now, this may seem contradictory, and I fully understand that.  Hopefully, after reading this, whether or not you agree with the veracity of the details, I'll have made the case well enough that the general assertions seem at least possible, if not plausible.  

To flesh out the case, we will first have to clarify initial premises:

1)  This model holds that the descriptive portion of Modern Money Theory (or neochartalism as it is often called) is the best representation of how existing Fiat economies function.  An introduction to MMT can be found here.

2)  There are some situations in which a free market can produce inefficient and socially undesirable outcomes when left to its own devices.

3)  Effective economic policy decisions from a central authority aim to correct inefficiencies and promote economic growth through the most non-intrusive method possible that still achieves these goals.  Functional Finance style approaches to policy action tend to accomplish this most readily.


Now on to the meat.  

To begin, I'd like to introduce you to a way of thinking about money I'll colloquially term "Numismatic Economics."  

I assert that the type of token circulated as a money in an economy can have an impact on economic activity and growth.  This tends to seem much more intuitive to bitcoiners than economists, for whatever reason.  It seems rather obvious to say that people will prefer to use the most convenient, cheap, and safe token available to conduct their transactions, and that the number of transactions they conduct may be influenced by the type of token they use.

Given that this is the case, and given that governments are able to enforce the mandatory acceptance of a token by vendors (legal tender laws) and create some sort of demand for their token via imposed tax obligations, we can say that the type of token a government 'forces' on the economy can have ramifications on the effectiveness of their policy decisions.

So I set out to create a framework that describe how this interaction might take place comparatively between single token systems as well as in multi-token systems.  The preliminary model I arrived at for the general case is available here.


In the context of this framework, it is easy to see how the addition of a bitcoin-like token circulating with the standard centralized electronic representation of the US dollar (the predominant current token at present) may push further the potential for economic growth, as it will tend to be cheaper to produce and transact, as well as having a significantly lower storage cost to users and anti-counterfeiting cost to the sovereign.  

All other things being equal, if a central bank accepted taxes in a digital currency whose blockchain that they could fork at will to effect policy decisions (likely through the coercive use of legal force), and if they correctly managed the rate of token production and the tax acceptance rate, economic activity could be effectively increased without diminishing the sovereign's regulatory capacity.

Be this desirable or undesirable in the context of our personal political viewpoints, the implication that a centrally-managed, decentrally-secured digital currency could viably interact with existing political entities in economically beneficial ways is significant.

If this sort of dynamic is accurate, perhaps mainstream economics can be convinced that digital currencies have real potential for use even within existing theoretical frameworks.



And, in a nutshell, I suppose that's it.

I'm interested in criticism on the model itself, as well as the concept it implies.  I'll attempt to answer all questions as promptly and thoroughly as possible, so please feel free to ask away.  Please attempt to keep discussion civil and academic, I look forward to hearing your thoughts!

Entire wars are fought and millions of lives ended all to prop up our current federal reserve banking system.

The bankers own the world.

Remember Libya? They were one of the few countries in the world that did not submit to the Bankers. Infact they were trying to go back to the gold standard and prop up the Libyan Dinar, which could have freed all of Africa from the control of the top Banking Elite.

Guess what happens?

All of a sudden Libya has a "revolution"...

I can think of more then 10 reasons.... =|

The Federal Reserve's dominance is a matter of "National Security" for the US Government. Expect them to act accordingly to try to maintain their dominance. But they will fail ultimately.

I live in the US and I want the dollar to collapse. Not out of some sick twisted desire to see people suffer, but because we need to separate ourselves out from under the absolute tyrannical control of the Federal Government. As long as we use their money, and as long as their money holds value, then we are their sheep.

There will undoubtedly be pain involved with the separation process, but I would rather pull off the bandaid quickly and experience some pain rather than endure decades and centuries under an oppressive government.

Who asked me if I wanted to be taxed? Oh wait-- no one did.

I pray that the dollar never implodes like people have predicted in this thread. I don't know about the rest of you guys but my investments are in mutual funds not bitcoins and if the dollar fell apart I'd lose a lot of money. The federal reserve might need some changes but no-one should want it to collapse that lives in the United States.

I pray that the dollar never implodes like people have predicted in this thread. I don't know about the rest of you guys but my investments are in mutual funds not bitcoins and if the dollar fell apart I'd lose a lot of money. The federal reserve might need some changes but no-one should want it to collapse that lives in the United States.

This x^infinity

Even though I'm new to Bitcoins, I believe it will eventually catch on like wildfire as more people and places start adopting Bitcoin. There are just too many good points for it not too succeed. The only way I can see the progression of Bitcoin slowing is through government regulation..

I want to End the Fed, but I want it to end as peacefully and orderly as possible. That is why I buy Bitcoin.