Quote from: ryepdx on March 27, 2011, 10:47:07 PM

Quote from: breandan81 on March 26, 2011, 11:48:07 PM

If a bunch of people did this it would basically be a leverage fueled price bubble in bitcoin, it would undermine bitcoin as much as it would the banks in the long run.

Exactly. The bitcoin economy would come crashing down as soon as people started buying back their fiat money to pay for things. For the bitcoin economy to really flourish we need to have as closed a system as possible.

The OP is talking about loan fraud, with a goal of destroying the existing banking system, and using BitCoin as a replacement for cash. While the conversation progressed to whether BitCoin can be used to live off-grid, I think the point is that in this scenario BitCoin holds no additional benefits beyond normal cash. Loaning money from a bank and defaulting on it will get your assets potentially seized, and "the man" can't seize well hidden cash any better than BitCoin. The loan fraudster might as well use cash.

Certainly if a bunch of misguided people THOUGHT that BTC offered benefits over cash when performing loan fraud, that might cause them to all simultaneously buy BTC, which would drive the price of BTC up. Then when they all simultaneously sold out of the market the price would go back down to what it was before. It may cause some larger fluctuations in the price of BTC than normal, but ultimately the economy wouldn't come "crashing down".

Even if BTC devalued so that 1BTC was worth just 1c, the position of the decimal point relative to fiat currency makes no difference to the BitCoin system. Your $100USD would buy more BTC now, but then you'd spend more BTC buying things with it. A devaluing currency hurts those holding it, but only by the EXACT amount it helped when it was increasing in value. It's a zero sum game.