# Why Government Debt? And What Are The Alternatives?

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### #35 AnssiH

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Posted 20 January 2015 - 02:08 PM

Bitcoin is just another level of abstraction: making it even more difficult to be able to live independant of government and brainwashed office clerks.

I realize you post mostly for past-time entertainment, but I'm still prompted to comment that, while Bitcoin is just another abstracted money system, it does have the unique feature that more cannot be created for political reasons.

So when a farmer has the choice between physical cash or cryptocurrency, that choice is between;
a. A currency that cannot be redeemed as anything, and whose total supply is adjustable by a third party
b. A currency that cannot be redeemed as anything, but whose total supply is predictable and not adjustable by any single party

Cryptocurrencies of course have not stabilized themselves in the marketplace at all, but if that can be reached, they can create their own little predictable economy whose value would persist while debt-based currencies keep steadily inflating.

Cryptocurrency in itself is of course hilariously silly idea in that it is in fact nothing, it's just a game. But one only needs to remind themselves that, that is exactly what money is already anyway. Just like I can't survive by eating a powerpoint presentation, you can't survive by eating cash.

-Anssi

### #36 pgrmdave

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Posted 20 January 2015 - 03:30 PM

All that money is good for is facilitating transactions between parties who don't have any specific goods or services that the other needs immediately, or where the values are more difficult to assess.

How much milk does a taxi ride cost? How much time spent programming your website is worth a pair of sneakers? What if you're a farmer, but I don't need what you grow, but you need your computer fixed and I'm the only one nearby who knows how to do it? Of course, you could call someone up - but how are you paying the telephone company?

Cryptocurrencies are useful to the degree that they can facilitate trade. There are two major problems with the ones I've seen - first, that they are too volatile and second that they are designed for deflation (which vastly favors the wealthy over the poor). Volatility within certain bounds isn't disruptive, but when the same amount of currency can purchase a pizza today, a car tomorrow, but crash and be nearly worthless the next day before rebounding and buying me another pizza the uncertainty causes markets to not move. That's the value of fiat money - the government can buy/sell amounts of money on hand to maintain the stability of the value. With backed currencies, this becomes much more difficult (and led to a *ton* of problems in the 1800's). The second one is more insidious, and I suspect that the creators of bitcoin knew exactly what they were doing.

Assume a normal, inflationary, economy with two people - the Ms. MoneyBags has $1,000 and Ms. Take is in debt$1,000. A big mac costs ~$5, so we'll use that as our guideline. Ms. MoneyBags can purchase 200 big macs, while Ms. Take has to make and sell 200 to get back to 0. Inflation sets in, and now a big mac costs ~$10. Now Ms. Moneybags can only afford 100 big macs but Ms. Take can get out of debt in half the time!

In a deflationary economy, the reverse happens. Now deflation sets in - instead of doubling, the price halves. A big mac is only $2.50. Hooray, you say! Now the poor people can afford more food! But that's *not* what happens. What really happens is that now Ms. MoneyBag's money goes much further - she can buy 400 big macs! Ms. Take, while technically being able to afford more than before, also has to work *twice as much* just to get out of debt. In an inflationary economy, people who are in debt get their debts slowly reduced, while people who have money have to invest just to stay even. In a deflationary economy, people who are in debt get into spiraling debts, where not only does the interest on the debt affect them but it gets harder and harder to work enough to pay off. Edited by pgrmdave, 20 January 2015 - 03:30 PM. ### #37 ErlyRisa ErlyRisa Questioning • Members • 439 posts Posted 20 January 2015 - 07:13 PM I realize you post mostly for past-time entertainment, but I'm still prompted to comment that, while Bitcoin is just another abstracted money system, it does have the unique feature that more cannot be created for political reasons. So when a farmer has the choice between physical cash or cryptocurrency, that choice is between; a. A currency that cannot be redeemed as anything, and whose total supply is adjustable by a third party b. A currency that cannot be redeemed as anything, but whose total supply is predictable and not adjustable by any single party Cryptocurrencies of course have not stabilized themselves in the marketplace at all, but if that can be reached, they can create their own little predictable economy whose value would persist while debt-based currencies keep steadily inflating. Cryptocurrency in itself is of course hilariously silly idea in that it is in fact nothing, it's just a game. But one only needs to remind themselves that, that is exactly what money is already anyway. Just like I can't survive by eating a powerpoint presentation, you can't survive by eating cash. -Anssi Cryptic currency (pun intended). I guess, after reading pgrmdave's post that all currency apart from the actual exchange of final goods/services is pseudo value. I understand how bitcoin can be a good thing, especially in 3rd world situations. , but again ,at this late stage the only people that are profiting are the westerners again. To show you the danger of currency that is difficult to understand I will show you the way we all thought when we were kids. Some of us thought we could buy ice-creams with monopoly money, of course once you found out monopoly money is not accepted at the store: You tried to photo copy$100 bills...when the store owner saw you trying todo this he rang your mother. This situation is now being legalised as real tender (Bitcoin being monopoly money), and its the kids that are sucking in the store owner. The kids aren't 5yr olds, they are faceless web publishers and engineers of vending machines. Not only is it cruel of the elite to be using a slight of hand in order to promote what will be chips stuck into our arms/head at birth, it's cruel to actually think that it will work.

I also see a verybad transitional phase where the 5yr old will be tricked into services that an adult that finds monopoly money from the recycle bin, can buy "doodle time", simply by quoting large figures. ie, It's the children that exchange with the toy money, and they are easier too convince that the transaction is of value, b/c too them they need that power ranger cloak in second life.

Carbon trading had/has its same folly: Alot of people don't know, or have done the figures to the molecule for trading in carbon dioxide and carbon. It was (again) another system by which a select few people can convince the populous todo as we wish of them.

eg. Greenpeace promotion in the 80 and 90's telling us to NOT buy sequestered carbon products...b/c in those days cutting down trees was bad.

If in the case of carbon trading, the advertisement of the system was again completely backwards...instead of cutting down trees and getting paid for sequestration...you were getting paid too let trees grow old and wither their sequestering capability as they age -acheiving nothing todo with helping the atmosphere, rather all it was doing was achieving a state in which the rich that own treed landed get richer by doing absolutely nothing other than advertising the fact that they own property that is treed.

I donot like people being treated as sheep: especially where the case is the information for knowledge is so cheap at the moment.

PS: When will EM trading be the norm...and how would it be? Is it that if I broadcast I get punished(charged) for broadcasting? Or do I get paid to broadcast? --ie. TV and radio stations don't want MORE channels (competition), they want less. The fact that the internet is free for now, is only b/c the quality of the information isn't as artisticly addictive, this is ofcourse changing, and changing alot faster than the media empires can keep up. Now this forum for example could charge me in bitcoin to be able have some conversation OR it could pay me for being here because I supply enough hits by those wanting to see my art....but if what I say seems fairly similar to my neighbour than how is it of any value? Therfore those that already seated as artists, will (and do) try to make the system in such a manner where they work less, while still being seated. Therefore charging me tobe on this forum is what would win in the end.

Beautiful Explanation

Edited by ErlyRisa, 20 January 2015 - 07:30 PM.

### #38 AnssiH

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Posted 01 February 2015 - 07:07 AM

In a deflationary economy, the reverse happens. Now deflation sets in - instead of doubling, the price halves. A big mac is only \$2.50. Hooray, you say! Now the poor people can afford more food! But that's *not* what happens. What really happens is that now Ms. MoneyBag's money goes much further - she can buy 400 big macs! Ms. Take, while technically being able to afford more than before, also has to work *twice as much* just to get out of debt.

Interesting thoughts, but I think there are quite a few important factors missing out from this speculation. Well, to be honest any speculation is incredibly difficult when it comes to cryptocurrencies because it would never realistically be the only currency of an economy, it would interact with other currencies. It just makes my head hurt to even think about it

But if we were to speculate on an economy consisting only of cryptocurrency, at least two additional things to factor in come to mind. One, generating debt would be much much harder (for good and bad, i.e. transactions would become more difficult in general). That would have a direct effect on prices. For instance, housing prices would not be driven by debt mechanisms as strongly as they are otherwise, and people would have less debt. The total amount of debt is completely secondary though, what is relevant is the cost of debt. I don't really know how that would play out.

Second, the total amount of cryptocurrency in the economy would roughly represent the entire demand of goods and services; it is when the economy grows, that the currency deflates (in the situation that no more currency is to be mined). If this mechanism is anticipated, then there shouldn't occur spiraling deflation... at least in theory.

Either way, I don't believe it would ever be possible to have an economy consisting only of cryptocurrencies, so this type of speculation is little bit moot... The interaction between transaction choices would have a radical effect on the whole economy, i.e. the behavior of an inflationary currency would also have a strong effect on the behavior of the deflationary currency...