Re: "Failure to Understand Bitcoin Could Cost Investors Billions" (Bitcoin's flaws)

Do you not believe a bitcoin black market could be formed? Especially when the state becomes more pervasive perhaps imposing price controls when inflation gets out of control, people may turn to bitcoin because at the moment it's far better than any other cryptocurrency out there at the moment and when the economic situation gets worse dollars or SDRs or whatever we're using in the future just will be hated by the people because inequality will be so great and the poor will be really poor.

Black market won't function so well because anonymity is broken for all due to footnote [2] in the OP. Due to the coin tainting by authorities explained in [2], then it will be very difficult to find someone to transact with you. Most will refuse. If you want the coin to function well, you have to prevent coin taint from fracturing the money system.

Coin taint is perhaps the most serious problem in Bitcoin. A core Bitcoin developer is trying to fix it with CoinJoin, but I explain in [2] why that won't work.

Also we are headed in massive deflation, not inflation. Please see the long list of armstrongeconomics.com links I provided which explain this upthread.

The way socialism collapses over and over again throughout human history is the people support the government to go tax+confiscate the rich. Eventually the rich becomes the middle class, e.g. look at what Obama is doing and IMF is proposing a 10% confiscation of all bank accounts. By the time the system is eating itself, the people don't have any money. Thus they demand the government to do more to tax+confiscate. This is a downward spiral into the Mad Max abyss. It has happened many times in human history, e.g. the Wiemar Germany then Hitler. But that is not the only example, there are 100s.

So yes we need that anonymous cryptocurrency and thus black market. My hope is it becomes as mainstream as possible. Else everyone sinks with the Titantic.

When the IMF confiscation comes, there will be a mad rush into Bitcoin and also (by the more astute) into a more strongly anonymous coin that doesn't have coin taint. When the authorities start tracking down Bitcoins and pushing the coin taint to reality, then a mad rush (of the less astute) out of Bitcoin into the more strongly anonymous coin.

Do you really believe the US government will choose deflation over inflation? Most academic economists want inflation at the moment and are not even worried about hyperinflation due to the low velocity of money, that's what the QE has been about hasn't it? They're trying to reach an escape velocity and increase consumer confidence before dialling back the QE and raising rates. Armstrong says it's impossible to maintain our reserve status and inflate our way out of this problem which is true but why then have they not started the deflationary measures already?

Don't forget the Quantity Theory of Money, M x V = P x Q. Thus if M increases but V (velocity of money) implodes (and it is already down -50% since 2008 in the USA), then you still have deflation, unless Q falls more than M x V does.

They are already starting the deflation. Don't you see Obama destroying the productive economy with Obamacare. Don't you see the NSA storing everything so they know where all the wealth is, as they prepare to share info with the tax authorities in every G20 nation (see my upthread link to that news story). Don't you see the plan to raise taxes. Don't you see the IMF calling for "financial repression" and confiscation of 10% of all bank accounts. Don't you see the Fed taper. Don't you see the 60% youth unemployment in southern Europe and preparing to spread to France and others, while ECB has no legal right to print:

http://armstrongeconomics.com/2014/02/11/ecb-structural-faults-switzerland-bail-out-of-banks/
http://armstrongeconomics.com/2014/02/08/europe-is-a-basket-case-just-turnout-the-lights-now-save-energy/

All the $trillions in QE ended up as dollar bond issues in the developing world a.k.a. peripheral economies. That is why you see the developing world booming in construction (e.g. the third-world Philippines has 14 of the 36 largest malls in the world [1]). This wasn't hyperinflation, it was inflating the developing world while deflating the western developed world. Note the Fed is tapering, so the developing world has peaked and is headed down.

There is a massive deflationary wave underway. It has started at the periphery and by 2015.75 it will reach the USA when the very strong dollar (from capital fleeing the developing world back into the dollar again) will choke off the USA economy. Coincidentally the US govt is funded to Sept 2015 precisely to the day that Armstrong's computer model predicts the USA to peak and turn down into this massive deflationary wave that will run into the 2020s with final bottom of the global crisis in 2032.

Here follows is the relevant upthread quote of myself:

Quote from: AnonyMint on February 08, 2014, 09:17:25 PM

Quote from: blablahblah on February 08, 2014, 08:21:13 PM

Look up the causes of hyperinflation. There doesn't even need to be an increase in the money supply -- hyperinflation is fundamentally a runaway collapse in the amount of trust the average person has in the underlying system.

[1]

Quote from: AnonyMint on January 06, 2014, 02:13:20 AM