One day, while I was learning about cipherspace, I discovered BitCoin. BitCoin is a completely decentralized, anonymous online monetary system that relies on a distributed database to facilitate transactions. The creator put a great deal of effort into ensuring that the system is secure and reliable. Unfortunately, there are no real assets backing he currency of BitCoin (and no coercive government backing it either). Thus ends BitCoin.
I can imagine, though, a system like BitCoin that allows people to write promissory notes and sign them with an RSA digital signature (to prevent couterfeiting). These promissory notes could be backed by gold, silver, fiat currencies, stocks and bonds, or pretty much anything. Then, these notes could be transfered from one person to another anonymously.
Couple this with an ebay-like service that allows people to swap these virtual currencies. Say, for example, that I have a gold note issued by a bank in South Africa. Since taking delivery of the gold could be a problem, I trade my notes for notes issued by a bank in U.S.A. Then, I can redeem those notes and have them FedEx me the gold (insured, of course).
This system would be Fed-proof, IRS-proof, FBI-proof and judgment-proof. This system would protect the users against monetary inflation, making it Fed-proof. Since nobody has a bossman ratting out their earnings, it is IRS-proof. It is FBI and NSA proof because all transactions are encrypted and anonymous. And, most importantly, it is judgment-proof because it is perfectly legal.
There are, at present, no laws that could be used to criminalize what I propose. Laws against money-laundering, for example, do not apply because there is no way to prove that the money came from an illegal source, such as drug dealing. Laws against tax-evasion do not apply either, because no taxes have ever been levied on imaginary currency. In addition, if you had your day in court, you could defend yourself on First Amendment grounds. Besides, international free trade agreements also have generous loopholes.
So what we are dealing with is anarcho-capitalism and wildcat banking on a global scale. If not for my non-existant programming skills, I'd be forking a new project off BitCoin right now.
Anybody here know C++?
"As long as there are sovereign nations possessing great power, war is inevitable."
@gabriel: Oh, man, you're begging for a flame-war.... ;-)
Of course, C++ and Perl are not even in the same solution-space... but I absolutely love Perl. Unfortunately, Perl has lost its roots with Perl6, which I think is going to be a fork, I don't think Perl5.x is ever going to be truly end-of-life'd, the code base is a large part of what makes Perl so powerful. Ruby and Python are Perl's closest relatives but they both lack the "down-and-dirty" quality of Perl5 that I fell in love with.
Clayton -
No worries, I'm just being inflammatory. I write C/C++ (C#, and some assembly) for a living, so I have a certain affection for them :). Now if there's any "God that Failed" book that should be written about a programming language, it's Ruby. Not a fan.
Micah71381:Anything can be taxed by the government. They tax you for owning a home, they tax you for owning a car, they tax you for having money, they tax you for making money, they tax you for spending money... I see no reason why they wouldn't tax you just because the currency of choice changed.
Clayton:And it would be unbacked. Which is why no one would ever use it.
filc:People need to learn about the regression theorum before they start fancying this silly stuff.
People are already accepting fiat money. What's the challenge to accept fiat money on a computer?
Very informative. I will need to ponder on this. Many thanks for your efforts.
Well, to rephrase Micah's post in my own words, he's basically saying, "Yes, there is Mises's regression theorem but I don't like it so, therefore, there are exceptions to it." His three people on an island example violates every principle of a gedankenexperiment. If there's something of great value in Micah's argument that you think I'm missing, please point it out and I will rebut it in detail. In the meantime, I recommend that you take a look at Mises's regression theorem itself:
http://mises.org/humanaction/chap17sec4.asp
http://mises.org/daily/1333
And here's a Mises daily directly discussing the subject of this thread (and saying precisely what I've been saying through this whole thread):
http://mises.org/daily/629
Micah, the difference that you are overlooking is that bitcoin's taxability would be voluntary and up to the user. A voluntary tax system is ok for libertarians. Your other examples of taxing a house, a car, and a bank account all rely on the ability of the taxation authorities to determine and attribute ownership (or income) to an individual with a social security number, which is not the case with 'careful' bitcoin users.
A voluntary tax is like a married bachelor or a square circle. It's unintelligible gibberish. Taxation is coercive by definition.
The public doesn't understand that kind of stuff. They don't worry that their money isn't backed by gold. They know they can buy stuff for it, that's enough.
They'll never be able to buy stuff for it because no one will ever start using it because it's unbacked. "Backing", in the Misesean sense, does not refer to a vault with a pile of "reserves". Rather, it has to do with the convertibility of the monetary medium back and forth into existing monies. The Somali schilling which was inflated to oblivion by Siad Barre is still in use today. It co-circulates in Somalia with foreign fiat currencies and even gold and silver coins for large transactions but it keeps on keeping on because it once had value and that value has been preserved by its incessant convertibility into other monies (30,000 somali schillings roughly equal to 1 US dollar when Benjamin Powell spoke on the subject in an online lecture I watched).
Look Clayton, I agree with you. I am merely pointing out that bitcoin as a medium of exchange in a parallel economy allows individuals the power to enforce the following quote from the IRS itself:
"Our tax system is based on individual self-assessment and voluntary compliance." 1975 IRS IR Audit Manual
Governments are not going to roll back taxes and create tax-free zones, because it's more in their interest to grow and to expand. The forces on the side of liberty periodically attempt to rein in the government but it merely has the effect of only slowing its rate of growth. This is unfortunate. The bitcoin economy will grow and prosper precisely because it has the potential to facilitate a parallel economy that can also operate beyond the scope of taxation. All types of transactions will be attracted to a taxation-free zone because throughout history no- to low-tax zones have always thrived against their counterparts (Hong Kong, US in the 1800s). This parallel economy will know no political borders so it will not even be clear which taxation authority has the jurisdiction over the economic participant(s). Even if the proper jurisdictional taxation entity could be reasonably determined, they would still be faced with applying a tax to a reusable proof-of-work 'puzzle'. Firstly, how do you tax a mathematical puzzle without giving it monetary legitimacy? How do you determine the political borders of the recipient key (if recipient is careful)? How do you determine the total amount to tax if bitcoin laundries and mixers are used? Today, an individual can work for bitcoin in anonymous fashion from an undetected geographic location and then spend bitcoin or anonymously trade out of bitcoin. I don't really see that changing. I'd be more worried about an authoritarian shutdown of the IRC network.
They'll never be able to buy stuff for it because no one will ever start using it because it's unbacked. "Backing", in the Misesean sense, does not refer to a vault with a pile of "reserves". Rather, it has to do with the convertibility of the monetary medium back and forth into existing monies.
You are right, but this implies that a "backed" currency does not have to be backed by actual commodities, just by the publics trust in it's value. The problem is getting a cryptocurrency accepted enough so that you can use it to buy stuff. It's kind of a vicious circle, nobody accepts the currency because it's not a generally accepted method of payment, and it's not a generally accepted method of payment because nobody accepts it. That's the problem, that's the obstacle that a cryptocurrency has to overcome to break the stranglehold of taxable government money. Now you see how creating the perfect currency from the beginning can't work, it has to come in increments. First, we need an anarchist PayPal, a way to secretly wire the old government fiat currency without it being taxable, preferably on mobile devices. Once people are comfortable using that (and they will because it's so efficient without taxes), these online credits will merge into new currencies that are more and more detached from government money. At first they are purely fiat, then currencies that are backed by commodities will emerge.
Edit: Or we need a rich libertarian institution that backs the cryptocyrrency by making it convertable into government money.
Look Clayton, I agree with you. I am merely pointing out that bitcoin as a medium of exchange in a parallel economy allows individuals the power to enforce the following quote from the IRS itself: "Our tax system is based on individual self-assessment and voluntary compliance." 1975 IRS IR Audit Manual
Which doesn't mean what you're trying to put it across to mean... (from the horse's mouth):
www.irs.gov/pub/irs-utl/friv_tax.pdf
The bitcoin economy will grow and prosper precisely because it has the potential to facilitate a parallel economy that can also operate beyond the scope of taxation. All types of transactions will be attracted to a taxation-free zone because throughout history no- to low-tax zones have always thrived against their counterparts (Hong Kong, US in the 1800s). This parallel economy will know no political borders so it will not even be clear which taxation authority has the jurisdiction over the economic participant(s). Even if the proper jurisdictional taxation entity could be reasonably determined, they would still be faced with applying a tax to a reusable proof-of-work 'puzzle'. Firstly, how do you tax a mathematical puzzle without giving it monetary legitimacy? How do you determine the political borders of the recipient key (if recipient is careful)? How do you determine the total amount to tax if bitcoin laundries and mixers are used? Today, an individual can work for bitcoin in anonymous fashion from an undetected geographic location and then spend bitcoin or anonymously trade out of bitcoin. I don't really see that changing. I'd be more worried about an authoritarian shutdown of the IRC network.
Point me to where I can buy a bag of potatoes with BitCoin, I would desperately like to know.
You are right, but this implies that a "backed" currency does not have to be backed by actual commodities, just by the publics trust in it's value.
*sigh - no, that's not what I was saying, I'm clarifying that "backing" does not mean a pile of stuff in a vault somewhere. The reason I'm pointing this out is that people commonly confuse money proper with money substitutes because fiat paper money is a money proper but looks like a money substitute. You can read about money substitutes here:
https://mises.org/humanaction/chap17sec11.asp
And how they relate to fiat money here:
https://mises.org/journals/rae/pdf/R72_3.PDF
The problem is getting a cryptocurrency accepted enough so that you can use it to buy stuff.
Yeah, that's the problem facing any currency. The answer is to produce what the market demands. The trouble with that answer is that there is no market for currencies, they are completely controlled by governments.
It's kind of a vicious circle, nobody accepts the currency because it's not a generally accepted method of payment, and it's not a generally accepted method of payment because nobody accepts it. That's the problem, that's the obstacle that a cryptocurrency has to overcome to break the stranglehold of taxable government money.
The problem with your thinking is that you're jumping straight from the problem facing any currency and then assuming that "cryptocurrency" solves that problem just because you can imagine it being used as an exchange medium. I can imagine an economy where bottle-caps are used as an exchange medium. That doesn't mean such a state of affairs ever can or will ever come about in the real world.
Now you see how creating the perfect currency from the beginning can't work, it has to come in increments. First, we need an anarchist PayPal,
PayPal was supposed to be the anarchist's PayPal. And look what happened to it.
a way to secretly wire the old government fiat currency without it being taxable, preferably on mobile devices. Once people are comfortable using that (and they will because it's so efficient without taxes), these online credits will merge into new currencies that are more and more detached from government money. At first they are purely fiat, then currencies that are backed by commodities will emerge
No way. People will never start accepting fiat digital currencies in payment for real goods and services. I will tell you what people might start accepting in payment for real goods and services... virtual monies from MMOGs. These tokens have real value in the online gaming environment (can be exchanged with other players and the game operator for digital rights in the game). It is interesting that there were some news articles a while back with government leaders wringing their hands about the tax implications of exchanging online gaming tokens. In Zimbabwe, phone minute cards are used as a medium of exchange. Their commodity value should be obvious.
A money substitute is only valued as a medium of exchange by virtue of its free and instant convertibility into the monetary backing. A fiat money directly violates this principle, therefore, cannot be a money apart from the use of coercion.
Clayton:PayPal was supposed to be the anarchist's PayPal. And look what happened to it.
Are you saying this will always happen? An anarchist PayPal couldn't exist?
Clayton:No way. People will never start accepting fiat digital currencies in payment for real goods and services.
Yes, but they will accept secret digital payments of government money. Anarchist PayPal. Then the credits on their anarchist PayPal account will merge into a online currency which has less and less to do with the government money it was based on. Then secondary online currencies will emerge that are convertible into that currency. Which will be a fiat digital currency, which people will accept as payment because it comes gradually. They never have to "start" accepting it. That's how we got to fiat money in the first place.
Clayton: Well, to rephrase Micah's post in my own words, he's basically saying, "Yes, there is Mises's regression theorem but I don't like it so, therefore, there are exceptions to it."
Well, to rephrase Micah's post in my own words, he's basically saying, "Yes, there is Mises's regression theorem but I don't like it so, therefore, there are exceptions to it."
It seems you have misunderstood me here. I was stating that I don't agree with all of the conclussions of the Mises's regression theorum. In particular where it attempts to claim that becaues it can happen in a certain way then it must happen that way in the future. I have read his theorum at http://mises.org/humanaction/chap17sec4.asp and the fallacy, in my opinion, lies in paragraph 7 for the reasons I explained in my post.
Clayton: His three people on an island example violates every principle of a gedankenexperiment.
His three people on an island example violates every principle of a gedankenexperiment.
Would you mind providng some detail as to what principles you are referring to and how I violated them? I am not disagreeing with your statement here, I just don't have enough information to formulate an opinion as to whether or not I have violated some principle of a thought experiment.
I have read the links you provided and I did not see anything in any of them that refutes my 3-man island example or my coercive government example.
Clayton (arachno-capitalist),
We all know that the judges and the IRS have enforced the tax code to suit the taxing authority. Please appreciate the subtlety here. Bitcoin ALLOWS individuals the freedom to exist under their own self-enforced voluntary tax system. If people like Micah want to pay because they feel some obligation, then that is their choice. It is not a married bachelor or a square circle. Some people actually want to claim all of their income in a voluntary manner and I would not deny them that. Why are you on this forum, anyway?
Clayton: They'll never be able to buy stuff for it because no one will ever start using it because it's unbacked.
They'll never be able to buy stuff for it because no one will ever start using it because it's unbacked.
This statement is provably false as seen by BitCoins. There are places that accept them and while you may not have need of those particular goods/services, they exist none the less.
Clayton: Point me to where I can buy a bag of potatoes with BitCoin, I would desperately like to know.
As far as I know you can't buy a bag of potatoes, but when gold coins were first minted and traded as a means of currency you couldn't buy everything with them. Some shops are likely to prefer the established system (barter, USD, etc.) for some time. Growth of a new currency is a slow process and not something that is instantly globally accepted. That being said, you can buy some goods/services with BitCoins now. The list is somewhat short but it exists none the less.