What prevents business from operating with a private intermediary exchange? The dollar is quickly losing it's importance, there's a real possibility for private companies to sell goods and pay their workers with perhaps a digital currency. This currency is ideally backed by hard assets, maybe even the company itself. The benefit is that it's not taxable or subject to inflation. I believe this was the concept behind company stores.
Of course, it's value requires a wide range of companies using it so that it can be the sole currency. If it's possible to buy all the necessities of life, it would motivate more people to abandon the U.S. dollar, thus strengthening the appeal for individuals and companies to adopt it even more-so.
Now is an opportune time for underground economies to flourish and compete with the government. All that's necessary is an intermediary company to initiate and facilitate exchange. Perhaps it can funded by the companies that buy into it.
This would eventually undo the relevancy of central governments. Thoughts?
Kyle:I believe this was the concept behind company stores.
Not according to the movies. it was to squeeze out more money from the workers
Kyle:The benefit is that it's not taxable or subject to inflation
it might be taxable.
they might confiscate it too, like they took the liberty dollars
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It would be very easy for a developed state like the US to tract down extensive black market operations. Whenever the black market is left to itself this is only done to keep afloat a moribund economy. In the case of “illegal” currency, a commodity would be far too easy to track and without banks all but the smallest transaction would be impossible.
There is also the risk of losing everything (the currency loosing all of its values) after being sacked and ‘demonetized’ by the government. All and all, not a very rosy picture for business. It would be far easier to just deal in foreign currency accounts, but that opportunity is open only to a few big corporations (there is a reason that the Swiss Franc is still partially linked to gold).
All we really need to completely circumvent the state and it's taxes, wars and inequality is a technological solution for reliably wiring money that the state can't control. Trade with zero taxes is so efficient that people have a strong incentive to use a free currency, if it could be made reliable and trustworthy. A quarter of the Californian economy is already underground. That's mostly private transactions with cash, but if there was some way to implement a reliable digital currency, maybe on smart-phones, it could take off and completely replace monopoly money. Initiatives like WikiLeaks have shown that the state can't control everything that happens on computers. So hopefully it can not control the emergence of a free digital currency. It would essentially be like PayPal, the challenge is that it has to reliable enough for people trust in using it.
the challenge is that it has to reliable enough for people trust in using it.
What's wrong with BitCoin?
Andris Birkmanis:What's wrong with BitCoin?
I don't know. It doesn't seem big enough. What's the point of working to earn a currency that nobody accepts? These currencies have to reach a critical mass to work and they never overcome that hurdle.
Now that I think about it, to break state control over money we don't need a new currency, but a way to secretly wire the old currency in which people trust. The state can inflate that, but the main problem is that there's a tax on every transaction. Once it becomes normal to wire money underground, new currencies will emerge. Alternative currencies like BitCoin and Liberty Dollars are handicapping themselves by trying to implement underground money and a new currency at once, which is just too unsafe and unreliable for people to accept. So it never takes off, it never becomes a generally accepted method of payment, and it's not worth having a currency that you can't buy anything for.
Alternative currencies like BitCoin and Liberty Dollars are handicapping themselves by trying to implement underground money and a new currency at once, which is just too unsafe and unreliable for people to accept.
You may be right in this respect.
However, I do not see how to wire fiat currency (or any commodity, for that matter) in the fully decentralized, peer-to-peer way BitCoins provides for its purely digital (meaning unbacked) money. I remember Clayton expressing pretty strong opinion against BitCoin, though I do not remember the gist of his arguments (was it exactly the fact that it is unbacked?).
I wonder why businesses don't already use some cryptocurrency for transactions with other businesses, for example to buy raw materials.
What would be the benefit for the spot transactions? I think the main benefit of not using fiat currecies would be in long-term contracts - but then how do you enforce them in court?
I guess the best places to look for existing use of cryptocurrency should be some industries/communities with a tight closed loop - by that I mean that a lot of value flows between a few actors in a circle - then they do not have to convince the entire economy to use. An extreme example would be closed communities similar to the Amish, but the same applies to zaibatsu/keiretsu etc. Basically, any command economy has some kind of cryptocurrency embedded into it, but that is probably not what you meant.
Disagree....Bitcoin is not handicapping itself. Yes, bitcoin operates in a fully decentralized peer-to-peer manner. The historical confirmation against the block chain prevents double spending in the bitcoin system. A system such as Digicash or its variant, eCache, will utilize a centralized mint to validate and reissue digital tokens in order to prevent double spending. The implementation to prevent double spending is the key trade-off in electronic cash systems, because it is far easier to prevent double spending within a centralized model than a decentralized model due to the fact that historical transactions have to be confirmed and somewhat retained in a distributed decentralized model. Simply a matter of cryptography.
What is important to Austrians and others requiring a friction-less value exchange paradigm that has the potential to facilitate tax-free transactions in a parallel economy is that any cryptocurrency that evolves will, by default, have features similar to bitcoin. Cryptographically speaking, you either validate against the block chain to remain decentralized or you move to a centralized model. Needless to say, a centralized model will not prevail and one only needs to look at the tragic history of e-gold to understand why.
http://themonetaryfuture.blogspot.com/2009/06/bullion-and-bandits-improbable-rise-and.html
There already are a number of local currencies popping up -- like BerkShares in MA. In that case, the currency is backed by dollars, they can be backed by anything.
See: http://en.wikipedia.org/wiki/Local_currency
Such currencies don't legally allow you sidestep taxes, though. The transactions might be transformed into a form of barter, but that's still a taxable event (see Form 1099-B). If you're talking about facilitating an underground economy, that's already happening with traditional cash.
I also don't see how a private intermediary exchange would prevent inflation. As long as more of the medium of exchange can be created, inflation would still exist. You really need a rare, not-creatable-on-demand material to prevent that -- like gold.
My first thought was that minimum wage laws would make paying employees in this currency complicated. Another thought was that this currency might be considered a financial instrument and subject to capital gains laws.