I never suggested any kind of central control on traders, just imagine what will start to happen when traders are able to borrow 10:1 or 50:1, you think that won't create ridiculous volatility?? You think any merchant will accept Bitcoin with massive daily swings? Because that is where things are headed!
Maybe we should have guys with guns in every city that oversee every Bitcoin trade controlled by a central entity to make the rules of how bitcoins can be traded.
That would be ideal. Maybe then we would have a useful currency.
And if someone tries to make a trade that doesn't follow the rules...shoot them in the face.
I'm saying that you are mistaken on the source of volatility. Illiquidity creates volatility not the other way around.
You are thinking too hard of using BTC as a store of value when that is not how merchants like tigerdirect are using it. Merchants today don't carry BTC on their books longer than they have to because of currency risk. They are using Bitcoin as a medium of exchange where volatility matters much less than illiquidity and bid-ask spreads. If the buyer has to buy on the bid and the merchant has to sell on the ask then BTC is not saving anybody money.
Bitcoin is itself volatile due to its newness, margin or no margin doesn't matter. But what traders do is vitally important to the usability of bitcoins. The best thing that can happen to bitcoin volatility is to create a trusted futures exchange with long term contracts that is also highly liquid. Only way to do that is through margin.