How To Use Bitcoin – The Most Important Creation In The History Of Man

Recently I wrote an article entitled The Most Dangerous Creation In The History Of Man.  The article covered the emergence of Bitcoin; an electronic open source peer-to-peer currency that has no central banking server, is untraceable (when proper steps are taken), and essentially can not be taxed through coercive measures.  The article makes the point that if a currency can not be taxed and controlled, eventually it will topple the coercively funded fascist control grid you call the modern State.  Read more about it in this Bitcoin forum post that explains it in more detail.

I’ve received several requests for more information about how people can put Bitcoin to work for them.  Most articles on Bitcoin, and even the Bitcoin site itself, don’t give a clear top to bottom description of how common users of Bitcoin can put the currency to use.

It is a tad confusing  if you are not familiar with how currency markets work, but not to worry, it is not as intimidating as it sounds.  Bitcoins are generated on a logarithmic scale by dedicated “miners” who run software that generate the complex hash codes which make up a Bitcoin.  Bitcoins can not be artificially inflated and require real resources (electricity and time) to produce.

Here are a few reasons why I think Bitcoins are superior to gold as medium of exchange:

1.  It is impossible to artificially inflate the supply of Bitcoins in existence.  They are produced at a known steady rate, the supply of which will eventually top out.

2.  Bitcoin transactions are made for the web!  It is impossible to actually ship gold across a wire.  The best one can do is use a medium that represents gold, such as shares of GLD, and trade those as a currency.  Clearly this leaves room for inflation of the money supply by unscrupulous bankers.  When a person transacts in Bitcoins, it is the equivalent of actually sending gold across a wire.  The unreproducible currency itself is transacted with, unlike a paper currency that represents a commodity.

3.  Bitcoins can not be confiscated since the files they reside on can be replicated and hidden in USB keys or anonymous servers.

4. The peer-to-peer nature of Bitcoin makes it as impossible to stop as BitTorrents.  Governments would have to shut down the web to stop it.

5.  It is impossible to create salted Bitcoins or “shave the edges” off of them.  There are wide spread rumors that the supply of gold that central banks are holding is loaded with tungsten bars coated in gold.

6.  Obviously they are lighter, easier to transact with, and far easier to secure than gold bullion.

Let me repeat:  Bitcoin IS NOT A PONZI – it is the same as if people were digging up gold nuggets out of the ground and then trading them as money.  Any claims that early adopters are simply promoting this as a Ponzi are like claiming people who were promoting buying Apple’s IPO were promoting a Ponzi.

Bitcoins use a 256 bit public/private key encryption algorithm that has never been cracked in practice and is considered secure by the NSA.

Bitcoins CAN NOT BE ARTIFICIALLY INFLATED.

Total Bitcoin production will TOP OUT in the future meaning NO NEW BITCOINS WILL BE CREATED BEYOND A CERTAIN DATE.

If you have additional concerns, please take the time to research the answers on your own.   Don’t blindly dismiss it because of a concern that could easily be addressed with some simple research and questioning of those who are current users of the system.

Anyone who has a thorough understanding of Austrian economics should immediately recognize the inherent benefits of Bitcoin.  Bitcoin is the equivalent of electronic gold.  Even better than gold in some respects.

Here are a few articles that cover the economics of the Bitcoin monetary system in more detail:

That said, lets go through the process of a common user setting up a Bitcoin account in an electronic bank and then purchasing some Bitcoins with US Dollars.  Then we will buy an item using the Bitcoins we just purchased.

Check out OKPay.com for a payment processing service that accepts Bitcoins and translates them directly into an e-wallet that can be accessed by a Master Card debit card anywhere in the world.

Step 1:  Setting up a Bitcoin wallet.

There are a few ways to set up a wallet.  One way is to install the Bitcoin client on your PC.  The client will automatically create a wallet address that you can accept payments to or send payments from.

A wallet is simply a datafile that stores your currency.  Transactions to and from a wallet are sent via encrypted peer-to-peer network and are processed across the network, meaning there is no central banking server that a person needs to log in to.

The datafile that stores the wallet information is worth its virtual weight in gold.  If that datafile is destroyed or compromised, the money you had in that wallet will be destroyed.  This is why many people chose to store the file on their home PC rather than entrusting it to some other site owner’s care.  There are advantages and risks to storing your wallet on someone else’s site.   Storing it on someone else’s site opens your wallet up to possible confiscation by government or abuse by the site owner, but it does offer the advantage of easy access and the redundancy/backups that most site operators employ.  On your local PC, using Windows 7, the datafile is located in the hidden folder “AppData” that is under your user directory:

C:\Documents and Settings\YourUserName\Application data\BitCoin (XP)
C:\Users\YourUserName\Appdata\Roaming\BitCoin (Vista and 7)

A good idea is to have multiple wallets and multiple backups, so if one wallet is compromised or destroyed on accident, your remaining money will not be effected.  People using Bitcoin can send Bitcoins to any wallet address by entering it into their local PC client wallet which has a tab for sending payments.

It’s that easy to create a wallet and use it!

Step 2:  Adding Bitcoins to your wallet

Getting Bitcoins to spend is a touch more complicated, but it is still a fairly straight forward process.

To get Bitcoins to spend, the most common way is to purchase them on the open market.  Since there is no central banking server or exchange, one must purchase them on a private open market exchange.  The most popular exchange is Mt. Gox.

Using Mt. Gox, we first create a user account on the site.  Then we need to add some funds to it in order to purchase some Bitcoins.

After you’ve created an account and logged into it, click on the “Add Funds” button.

In order to add funds to your Mt. Gox exchange fund, you have a few options.  I will be using a Dwolla account for this example.

After creating an account on Dwolla, you can add funds to your Dwolla account directly from whatever bank you chose to bank at by adding a bank account to your Dwolla account.  You’ll need to verify the bank account by entering in the amount of the penny transactions Dwolla sends to your bank to verify that you actually own the account in question.  It may take up to 72 hours for Dwolla to send the transactions and for them to show up in your bank transaction history.  Bookmark this page and return later if you don’t already have a Dwolla account.

Clicking the link that represents your account number on the Mt. Gox “Add Funds” page under the Dwolla payment method will automatically bring up Dwolla with the appropriate transaction to Mt. Gox already formatted.  All you have to do is enter in the amount you wish to add to your Mt. Gox exchange fund and complete the transaction.

After you’ve got some funds in your Mt. Gox exchange fund, you’ll be able to buy Bitcoins on the open market.

On the Mt. Gox site, click the “Buy Bitcoins” link on the main page.  The easiest and fastest way to get coins is to simply purchase them at the current asking price, which at the time of this posting was $9.28001 USD for one Bitcoin.  Mt. Gox explains how the trade transactions work here.

When buying Bitcoins, your Mt. Gox account will be debited the amount your order filled at and the Bitcoins will be sent to the address of the wallet of your choice.

Congratulations, you now have some Bitcoins to spend!

note:  It is recommended that you use a different wallet address to receive and send Bitcoins each time you make a transaction.  This is not required, but it does help maintain your anonymity by making it harder to trace your transactions through the block chain.  If a vendor knows your identity because you purchased a product from them, and you have used the same wallet address for all your transactions, the vendor would be able to see the entire transaction history for your wallet by looking at the block chain.  Look for the “New Address” button on the bottom of your Bitcoin client to get a new address.

Step 3: Securing your wallet

Older Bitcoin clients do not encrypt the wallet.dat file.  Anyone who can access it can easily steal all of your coins. Use a file encryption program if there is any chance someone might stumble upon your wallet.  The latest version of the client has built in wallet cryptography that can be enabled by clicking the menu option “Settings” -> “Encrypt Wallet”

A good practice is to keep at least two wallets, one as a “current account” for everyday transactions and one as a “savings account” where you store the majority of your Bitcoins and keep off-line.

The “savings account” wallet should be backed up in encrypted form only, and all plain text copies of this wallet should be erased. In case someone gains unauthorised access to your computer (either by physically stealing it or by exploiting a system vulnerability via the internet), they will only be able to spend the coins in your “current account” wallet.

In most operating systems, including Windows, Linux, and Mac OS X, simply deleting a wallet.dat file will not generally destroy it. It is likely that advanced tools can still be used to recover the wallet.dat file, even after it has been deleted.

For Windows, the built-in command cipher /W will shred all previously-deleted files. Rwipe or CyberShredder can securely delete individual files.

If you chose to keep your wallet on your local PC, I recommend encrypting your main wallet file that holds the bulk of your savings with TrueCrypt, and keeping an unencrypted wallet file for everyday use.  I like the idea of keeping the everyday wallet on InstaWallet, and keeping your main bank on your local PC, encrypted by TrueCrypt, and backed up onto a thumb drive.  Wallet sites like InstaWallet are still fairly new and they have not had a lot of time to prove their trustworthiness.  Use them at your own risk.  [Update 4/3/2013, Instawallet was hacked and is now permanently closed.  This is a good lesson to keep your currency on your own computer.]

Make sure your TrueCrypt password is at least 12 characters long.  8 character passwords can be cracked easily by brute force hacking attacks.

If you really want to do some super secure transactions using Bitcoin, use the Tor web browsing network that hides your IP address from online identities to do your shopping and communicating.  Tor is a free open source project.  Learn more about it here.  Then follow the directions to anonymize your transactions here.

Other Odds And Ends:

There are other ways to acquire Bitcoins as well, such as mining for Bitcoins or purchasing them directly from other holders using sites like PayPal.  You could literally put up a post on an internet forum and ask people if they will sell their coins to you for a direct transaction through PayPal.

Mining for Bitcoins is a bit more complex and your average user shouldn’t even worry about it.  For more information on mining for Bitcoins, look here.  It used to be that a single PC could effectively mine the coins, but today, it requires a collective pool of computers or a powerhouse server to be able to mine coins at an economically efficient rate.  Mining coins is a commercial enterprise that requires excessive resources, just like mining for gold does.

Reason Magazine comments on Bitcoin:

Sites currently accepting bitcoin as payment.

Techland article on Bitcoin.

Electronic Frontier Foundation article on Bitcoin.

Anyone may freely distribute this article or use any portion of it as they see fit.  I encourage you to do so.

I have no stake in promoting this. I am not being paid to write this.  I am not receiving a commission for writing this.  I am staking my site’s reputation on promoting this because I feel the positive benefits to humanity that can arise from this currency demand that it be given public attention.

  • Stu

    This is a great writeup: thank you. One thing I should point out is that having the long section on wallet encryption is very good, but the reason behind that section is the same reason you shouldn’t use any old service like InstaWallet to hold an appreciable amount of coins. IMO, you should add more of a warning on that recommendation: online wallet services are essentially banks, and none of them have had time to prove themselves trustworthy.

    • http://fascistsoup.com/ Michael Suede

      I agree, which is why I made the statement:

      “I like the idea of keeping the everyday wallet on InstaWallet, and keeping your main bank on your local PC, encrypted by TrueCrypt, and backed up onto a thumb drive.”

      I’ll highlight it

  • http://twitter.com/statspotting StatSpotting.com

    I can imagine the future as I read your post – multiple wallets, one you carry around in your mobile, one you keep in the cloud, one you keep in your house etc – i am convinced this is the future.

    the only question i have is this: will the governments allow this to happen? seriously?

    • http://fascistsoup.com/ Michael Suede

      I don’t think they have much of a choice.

      Once it gets big enough they will try to stop it, but all that will do is make more people use it.

      Just like drugs.

      • http://www.facebook.com/annerajb Anner J. Bonilla

        And then is where they are gonna come up with the war on bitcoins.

        • Kaioti

          Nah, they will co-opt it so they can collect taxes. The UN will be instrumental. In fact it is really a perfect run-up to what some would like to do.

  • Jackson

    Great write-up..tip coming your way

    • http://fascistsoup.com/ Michael Suede

      Thank you so much Jackson!

  • Pingback: Austro-libertarian/AnCap/Market Anarchist circle jerk thread - Page 24 - Grasscity.com Forums

  • Doomdumas

    Nice article, I’ll share it, and I’ve sent a tip for this nice work !

    • http://fascistsoup.com/ Michael Suede

      Thanks so much doomdumas!

  • Mike Montagne

    Michael, the “danger” of your proposition has no teeth.

    First of all, conducting what (at most) will only be a mere fraction of our overall trade will certainly not solve the fundamental issues of the present obfuscation of our currency. We do not borrow money from banks: au contraire, they merely publish evidence of our promissory obligations, absorbing no more than the negligible costs of publication. The real issues therefore are 1) the laundering of principal into their unwarranted possession (for the real creditor who gives up property for the promissory obligation is paid in full; and the obligation therefore is to pay and *to retire* principal from circulation — paid principal is the property of no one; and it is certainly not the property of banks); and 2) the unjustifiable imposition of interest therefore requires us to perpetually reflate a vital circulation of the interest and principal we pay out of the circulation in the way of servicing any existent sum of debt. Failing to borrow further then, we cannot even persist in servicing the initial debts of the finite lifespan of any such system.

    This perpetual obligation to reflate the circulation then perpetually increases the sum of debt, and dedicates ever more of a circulation to servicing a sum of artificial, falsified debt to the purported banking system, until we suffer terminal failure. Principal borrowed back into circulation comprises new debt equal to the former sum of debt which might otherwise be presumed to be paid down — therefore making it mathematically impossible to pay down the sum of debt. Interest on the other hand, paid out of circulation and borrowed back into circulation to maintain a vital circulation perpetually therefore increases the sum of debt by so much as periodic interest on an ever increasing sum of artificial, falsified debt. Thus any system subject to this obfuscation of our promissory obligations inherently engenders its own failure at even an inherently escalated rate of re-borrowing (reflation), until we suffer the present terminal failure — a failure from which we cannot recover because even to artificially sustain the system is to accumulate further sums of falsified debt.

    You claim gold will save us. But gold cannot save us from the real problems, because it has no power whatever to arrest this process of perpetual, escalated multiplication of artificial indebtedness.

    Of course, the reason this country was obliged to leave the gold standard furthermore, was that no finite quantity of circulation can *possibly even* maintain a consistent 1:1 relationship between a volume of circulation (or representation of a volume of value) and the volume of the ostensibly represented value itself. The faults of the gold standard therefore have compelled the fractional reserve practice of the present era, because of the injustices imposed not only upon our commerce and industry, but upon any existing contract to deliver.

    Thus no matter how much you might “succeed” in this unqualified proposition, we would only suffer a stupendous restriction of industry and commerce under even the whole of the gold existing in the world today, for *at least* it is obviously impossible for the gold to represent both the value of the volume of gold, and whatever volume of commerce/industry/production as well. It is this very disparity in volumes which itself makes it mathematically impossible for gold to engender the stability or “honesty” (without honesty at all) of the only, vital 1:1 relationship between circulation and represented value which *can* honestly represent the latter.

    So your proposition has no possible beneficial effect: interest will continue to multiply artificial indebtedness even beyond a terminal sum of debt (because you can hardly repay/resolve the sum of debt in the world by gold (and you would give up the gold in so doing); and because the volume of gold has no power to rightly/honestly represent (or thus convey) our production in just commerce.

    The only proposition which does solve these issues is mathematically perfected economy™, because mathematically perfected economy™ and mathematically perfected economy™ alone rectifies the obfuscation of our promissory obligations (eradicating the purported banking system); re-finances all existent debt under MPE™, counting all prior payments of interest instead toward principal; and thus achieves a perpetual 1:1:1 relationship between remaining circulation, remaining value of represented property, and remaining obligation to pay just that much for the remaining value of represented property… altogether by no more than an obligatory schedule of payment, retiring principal at the rate of consumption or depreciation of the related property. Not only does this prescription/pattern alone solve the issues of purported “honest” money then; it accomplishes this vital purpose even without any regulation, by no more than eradicating interest, and an obligatory schedule of payment, *rightly* retiring principal at the rate of consumption of the related (and therefore truly represented) property.

    See http://tnsradio.com/?cat=11

  • Mike Montagne

    Michael, the “danger” of your proposition has no teeth.

    First of all, conducting what (at most) will only be a mere fraction of our overall trade will certainly not solve the fundamental issues of the present obfuscation of our currency. We do not borrow money from banks: au contraire, they merely publish evidence of our promissory obligations, absorbing no more than the negligible costs of publication. The real issues therefore are 1) the laundering of principal into their unwarranted possession (for the real creditor who gives up property for the promissory obligation is paid in full; and the obligation therefore is to pay and *to retire* principal from circulation — paid principal is the property of no one; and it is certainly not the property of banks); and 2) the unjustifiable imposition of interest therefore requires us to perpetually reflate a vital circulation of the interest and principal we pay out of the circulation in the way of servicing any existent sum of debt. Failing to borrow further then, we cannot even persist in servicing the initial debts of the finite lifespan of any such system.

    This perpetual obligation to reflate the circulation then perpetually increases the sum of debt, and dedicates ever more of a circulation to servicing a sum of artificial, falsified debt to the purported banking system, until we suffer terminal failure. Principal borrowed back into circulation comprises new debt equal to the former sum of debt which might otherwise be presumed to be paid down — therefore making it mathematically impossible to pay down the sum of debt. Interest on the other hand, paid out of circulation and borrowed back into circulation to maintain a vital circulation perpetually therefore increases the sum of debt by so much as periodic interest on an ever increasing sum of artificial, falsified debt. Thus any system subject to this obfuscation of our promissory obligations inherently engenders its own failure at even an inherently escalated rate of re-borrowing (reflation), until we suffer the present terminal failure — a failure from which we cannot recover because even to artificially sustain the system is to accumulate further sums of falsified debt.

    You claim gold will save us. But gold cannot save us from the real problems, because it has no power whatever to arrest this process of perpetual, escalated multiplication of artificial indebtedness.

    Of course, the reason this country was obliged to leave the gold standard furthermore, was that no finite quantity of circulation can *possibly even* maintain a consistent 1:1 relationship between a volume of circulation (or representation of a volume of value) and the volume of the ostensibly represented value itself. The faults of the gold standard therefore have compelled the fractional reserve practice of the present era, because of the injustices imposed not only upon our commerce and industry, but upon any existing contract to deliver.

    Thus no matter how much you might “succeed” in this unqualified proposition, we would only suffer a stupendous restriction of industry and commerce under even the whole of the gold existing in the world today, for *at least* it is obviously impossible for the gold to represent both the value of the volume of gold, and whatever volume of commerce/industry/production as well. It is this very disparity in volumes which itself makes it mathematically impossible for gold to engender the stability or “honesty” (without honesty at all) of the only, vital 1:1 relationship between circulation and represented value which *can* honestly represent the latter.

    So your proposition has no possible beneficial effect: interest will continue to multiply artificial indebtedness even beyond a terminal sum of debt (because you can hardly repay/resolve the sum of debt in the world by gold (and you would give up the gold in so doing); and because the volume of gold has no power to rightly/honestly represent (or thus convey) our production in just commerce.

    The only proposition which does solve these issues is mathematically perfected economy™, because mathematically perfected economy™ and mathematically perfected economy™ alone rectifies the obfuscation of our promissory obligations (eradicating the purported banking system); re-finances all existent debt under MPE™, counting all prior payments of interest instead toward principal; and thus achieves a perpetual 1:1:1 relationship between remaining circulation, remaining value of represented property, and remaining obligation to pay just that much for the remaining value of represented property… altogether by no more than an obligatory schedule of payment, retiring principal at the rate of consumption or depreciation of the related property. Not only does this prescription/pattern alone solve the issues of purported “honest” money then; it accomplishes this vital purpose even without any regulation, by no more than eradicating interest, and an obligatory schedule of payment, *rightly* retiring principal at the rate of consumption of the related (and therefore truly represented) property.

    See http://tnsradio.com/?cat=11

    • http://fascistsoup.com/ Michael Suede

      “First of all, conducting what (at most) will only be a mere fraction of our overall trade will certainly not solve the fundamental issues of the present obfuscation of our currency. We do not borrow money from banks: au contraire, they merely publish evidence of our promissory obligations, absorbing no more than the negligible costs of publication. The real issues therefore are 1) the laundering of principal into their unwarranted possession (for the real creditor who gives up property for the promissory obligation is paid in full; and the obligation therefore is to pay and *to retire* principal from circulation — paid principal is the property of no one; and it is certainly not the property of banks); and 2) the unjustifiable imposition of interest therefore requires us to perpetually reflate a vital circulation of the interest and principal we pay out of the circulation in the way of servicing any existent sum of debt. Failing to borrow further then, we cannot even persist in servicing the initial debts of the finite lifespan of any such system.”I agree so far, but I’m not sure what point of mine you are addressing with this.”This perpetual obligation to reflate the circulation then perpetually increases the sum of debt, and dedicates ever more of a circulation to servicing a sum of artificial, falsified debt to the purported banking system, until we suffer terminal failure. Principal borrowed back into circulation comprises new debt equal to the former sum of debt which might otherwise be presumed to be paid down — therefore making it mathematically impossible to pay down the sum of debt. Interest on the other hand, paid out of circulation and borrowed back into circulation to maintain a vital circulation perpetually therefore increases the sum of debt by so much as periodic interest on an ever increasing sum of artificial, falsified debt. Thus any system subject to this obfuscation of our promissory obligations inherently engenders its own failure at even an inherently escalated rate of re-borrowing (reflation), until we suffer the present terminal failure — a failure from which we cannot recover because even to artificially sustain the system is to accumulate further sums of falsified debt.”Again, I agree.  This process is part of what makes fractional reserve banking inherently unstable.”You claim gold will save us. But gold cannot save us from the real problems, because it has no power whatever to arrest this process of perpetual, escalated multiplication of artificial indebtedness.

      Of course, the reason this country was obliged to leave the gold standard furthermore, was that no finite quantity of circulation can *possibly even* maintain a consistent 1:1 relationship between a volume of circulation (or representation of a volume of value) and the volume of the ostensibly represented value itself. The faults of the gold standard therefore have compelled the fractional reserve practice of the present era, because of the injustices imposed not only upon our commerce and industry, but upon any existing contract to deliver.”
      Bzzzzzz….  here is where you go way off course.In a real gold standard there is no fractional reserve banking.  There is only direct specie transaction for goods and services.  In such a system, banks operate essentially as nothing more than secure warehouses for specie and coordinators who put lenders and borrowers together.In specie-only currency systems, there is absolutely no way to have fractional reserve lending.  In order to have fractional reserve lending, which is what leads to perpetual debt cycles, one must have specie be represented by paper.  Only when specie is represented by paper is it possible to have a fractional reserve lending system.Bitcoin is the equivalent of forcing everyone to transact in specie.  I challenge you to demonstrate how fractional reserve lending would operate using Bitcoins.  It is impossible.”Thus no matter how much you might “succeed” in this unqualified proposition, we would only suffer a stupendous restriction of industry and commerce under even the whole of the gold existing in the world today, for *at least* it is obviously impossible for the gold to represent both the value of the volume of gold, and whatever volume of commerce/industry/production as well. It is this very disparity in volumes which itself makes it mathematically impossible for gold to engender the stability or “honesty” (without honesty at all) of the only, vital 1:1 relationship between circulation and represented value which *can* honestly represent the latter.”
      This makes no sense to me.  Gold is money.  In a real gold standard, it is used to represent the value of goods and services.  Gold doesn’t have a lot of uses other than jewelery so on its own it has almost no value.  It is only when gold is used as a store of wealth to represent the value goods and services does it gain any real value.  So I can’t follow your argument here at all. “So your proposition has no possible beneficial effect: interest will continue to multiply artificial indebtedness even beyond a terminal sum of debt (because you can hardly repay/resolve the sum of debt in the world by gold (and you would give up the gold in so doing); and because the volume of gold has no power to rightly/honestly represent (or thus convey) our production in just commerce.”
      Since there can be no fractional reserve lending under a real gold or Bitcoin standard, this argument makes no sense.  Gold certainly does have the power to represent the value of all goods and services in the world.  Gold is highly divisible, and if smaller divisions of money are required than gold could feasibly offer, that can be accomplished through the inclusion of silver and copper specie.  Bitcoins don’t have a divisibility problem at all.   They are divisible to 8 decimal places.”The only proposition which does solve these issues is mathematically perfected economy™, because mathematically perfected economy™ and mathematically perfected economy™ alone rectifies the obfuscation of our promissory obligations (eradicating the purported banking system); re-finances all existent debt under MPE™, counting all prior payments of interest instead toward principal; and thus achieves a perpetual 1:1:1 relationship between remaining circulation, remaining value of represented property, and remaining obligation to pay just that much for the remaining value of represented property… altogether by no more than an obligatory schedule of payment, retiring principal at the rate of consumption or depreciation of the related property. Not only does this prescription/pattern alone solve the issues of purported “honest” money then; it accomplishes this vital purpose even without any regulation, by no more than eradicating interest, and an obligatory schedule of payment, *rightly* retiring principal at the rate of consumption of the related (and therefore truly represented) property.”Under your system, explain why a lender should voluntarily lend money to someone without getting interest back.Time has value, therefore lending my money now means I can’t spend it now.  I would have to wait to be repaid back, and further, there is a risk that I might not be paid back because the guy might default on his obligations.I need to be rewarded for the lost time I have with my money and the risk of lending it to someone who might not pay me back.Further, the money that was borrowed went into the production of new goods or services.  Presumably more goods now exist due to the borrowing which means if the money supply remains stable, less money is now required to represent all the products in existence.  This results the currency constantly appreciating in value under a gold standard, which obviously means less and less money needs to be borrowed in the future to accomplish the same tasks.

      • Mike Montagne

        Michael, you merely claim I don’t make sense; and yet my remarks address the math and the mechanics of the circulation which you purport to solve (quite incorrectly therefore) in your purported bitcoin proposition. In fact, you don’t even identify what problems are to be solved; and apparently therefore, you simply hope *we* “understand” like you suppose to “understand” that the material of which “money” is fabricated is the issue; and that gold is just somehow the answer. How could this possibly be true? We can hardly “understand” such a thing without comprehensive analysis of the issues at hand:First of all, you quote me:”First of all, conducting what (at most) will only be a mere fraction of
        our overall trade will certainly not solve the fundamental issues of
        the present obfuscation of our currency.”With this you propose that you agree, for reasons which are neither expressed nor qualified as we would a proof of a veritable theorem (which might in turn comprise an equivalent of monetary science which any of us can assess to be a prevailing observation). But it appears we have a fundamental misunderstanding, largely at least from the disposition of both your article and your reply. You appear at least (because of the scope of your article and reply is restricted to this purported remedy) to believe that gold solves our problems nonetheless — regardless of the fact your proposition will likely be exercised by few if any.But quite likely then we don’t agree on this first statement. What I meant to be understood (from the rest of my post as well) was *both* that the finite quantity of gold can hardly sustain all our trade (much less the much greater volume of trade we might enjoy in a truly repaired “economy”), resolve our debts, resolve our contractual commitments, OR provide a consistent value to a relatively fixed volume of currency pitted against a need to perpetually and immutably represent volumes of production inevitably vacillating widely from an initial valuation. This of course breaches one of the most important principles which even gold bugs cry out against, that we somehow suffer circulatory inflation… and that this is the cause of our present problems.That claim however is widely amiss, for *by definition*, if we suffered circulatory inflation, the circulation would exceed the remaining value of all represented property. Obviously, this is not the case, for instead we suffer a grossly deflated circulation.Thus, claims of circulatory inflation cannot possibly explain the present conditions; NOR HOWEVER could some arbitrary volume of circulation, far below in fact the present deflated volume, possibly serve to solve deflation.What is the cause of this deflation?To find the cause, you have to bore down at least to the very fundamental mechanics of any proposed currency, for nothing less can turn up whatever explains our present predicament. Nothing less too therefore can pave a way to solution, that very identification of the problems we must solve.WHEN you bore down to the fundamental mechanics of the present obfuscation of our promissory obligations, you will turn up that problem.So what is it? That our promissory obligations weren’t rendered in some exceedingly expensive material, the purported processes of which don’t even actually advocate a perpetual standard (for the last thing advocates of “honest money” or “constitutional money” would want is a return to the “constitutional value” of gold)?There is no veritable argument for gold solving our problems (even on the least scale), because the present obfuscation of our promissory obligations imposes the only two crimes against us which precipitate in our present predicament.How is that?First of all, we do not borrow money from banks: Banking systems instead merely publish evidence of our promissory obligations. Issuing this evidence in gold or silver or platinum or plastic or paper matters not. What matters is the obfuscation. Why?For the only two issues imposed by their obfuscation, two huge crimes are imposed upon us which inevitably precipitate in the present predicament:1. Because the banking system gives up no lawful consideration which equates to a debt to the banking system (which merely publishes evidence of our promissory obligations *to each other*); because the real creditor (who gives up property for the promissory obligation) is paid in full from the outset of any resultant arrangement (and is denied interest by the purported banking system); and because the resultant obligation therefore is to pay and to retire principal from circulation at no less than the rate of consumption or depreciation of the related property…Therefore we do not borrow money from banks; they merely publish evidence of our promissory obligations to each other (absorbing no more than the negligible costs of publication); and therefore, particularly as the principal isn’t even a property of the bank, interest is entirely unjustified and unwarranted: The banking system in fact then has merely intervened upon our commerce, insisting our promissory obligations be issued on its paper, even subject to interest.THE FIRST MONUMENTAL CRIME AGAINST US THEN IS THAT THIS OBFUSCATION OF OUR PROMISSORY OBLIGATIONS LAUNDERS ALL THE PRINCIPAL EVER SO CREATED INTO THE EVER UNWARRANTED AND UNJUSTIFIABLE POSSESSION OF THE PURPORTED BANKING SYSTEM.2. THE SECOND, EVEN MORE MONUMENTAL CRIME AGAINST US THEN, is that the unwarranted exploitation of our promissory obligations to each other as subject to the unjustifiable imposition of interest, comprises an implicit obligation to maintain a vital circulation. Why? We are compelled to pay PRINCIPAL + INTEREST out of a circulation which at most can be comprised of no more than SOME remaining principal. THUS WE CANNOT EVEN PERSIST IN SERVICING ANY INITIAL OBFUSCATED “DEBTS” (promissory obligations TO EACH OTHER) WITHOUT PERPETUALLY BORROWING BACK INTO CIRCULATION WHAT SO MUCH AS PERSISTS IN “A VITAL CIRCULATION,” sufficient to sustain at least whatever industry is obligated to service an ever escalating sum of debt.The sum of debt perpetually escalates under an *obligatory*, perpetual escalation of borrowing therefore, because the vital circulation can only be maintained by perpetually borrowing interest and principal back into circulation. What principal we must borrow back into circulation of course then makes it mathematically impossible to pay the sum of debt down (so long as we succeed in maintaining the vital circulation); and of course then, being as what interest we must borrow back into circulation therefore counted none against a previous sum of debt, re-borrowed interest therefore increases the sum of debt by so much as periodic interest on an ever greater sum of debt until of course we suffer the present, inevitable, and terminal monetary failure.The issue isn’t THE MATERIAL upon which or in which the promissory obligations are evidenced. The issue is the obfuscation of promissory obligations to pay and to retire principal… into an unwarranted and unjustifiable debt to the purported banking system, which only imposes “interest” AS IF the principal were a property of the banking system (which instead, has merely created evidence of a property which belongs not to the banking system at all).Limiting the circulation to a finite volume of gold actually imposes further deflation upon us. Whose money is to disappear or to be defeased? How are our contractual obligations to be filled. How do we save for the future, resolve our debts, fulfill our contractual obligations, or even maintain our possession of gold as subject to those obligations, if we divide $80b (or whatever *claimed*) monetary reserves amongst 300m people to have $266.66 apiece to do so?Worse, still suffering obfuscated debts subject to interest, how do we avoid the inevitable, terminal culmination of any plausible process of *maintaining* a vital circulation all the while?You do not solve our problems. In fact you haven’t even mentioned them. And now the authority by which you purport to do so denies my arguments even make any sense.In 1983 I provided the Reagan Administration with computer models (which you can still download from my pages) which projected from the very described process that the present lie of economy would reach its terminal failure at approximately 2010 AD.If you would like to defend your bitcoin proposition and your assertion my arguments make no sense… stray wide of the mark… and so forth, I invite you to be a guest on my radio show. I have a 3-hr time slot which, owing to preferential treatment, is often extended to as much as 7 hours. That ought to give you plenty of time to argue your claims serve us. Meanwhile, neither are your transactions truly untaxable. They are not even a real invention (for neither gold nor computerization are inventions; and even despite 1,024-bit encryption, transactions are traceable any time their end must interface with the regular system), much less then is bitcoin the most important or most dangerous invention in history, because there isn’t even a good reason to adopt it across the world. Worse perhaps, in failing to solve inherent, irreversible, and therefore terminal multiplication of artificial indebtedness by interest, and in imposing dramatic deflation (versus protecting us from inflation), broad adoption would mean a speedy end to “the economy.”Now, if you really wanted to save the world, we’d have to wonder why you aren’t advocating solution instead. As for myself, if yours were my proposition, I wouldn’t expect not to land in jail even for as much as another 2 years. No one is going to beat the present plutocracy. The only goal which serves us will be a restoration of justice — which certainly will mean to eradicate the present exploitation of our right to issue promissory obligations free of exploitation.So, if you would like to defend your proposition(s), you are welcome to be a guest on TNSRadio (“mike montagne on mathematically perfected economy and absolute consensual representation”). Skype me at my public Skype ID: pfmpe2012.Me

        • Mike Montagne

          The software here really munched my reply. My public Skype ID is pfmpe2012

      • Mike Montagne

        Excuse me. I’m going to try submitting my post one more time. I discovered a tab character artifact from copying your quotation which evidently may have munched all formatting:

        Michael, you merely claim I don’t make sense; and yet my remarks address the math and the mechanics of the circulation which you purport to solve (quite incorrectly therefore) in your purported bitcoin proposition. In fact, you don’t even identify what problems are to be solved; and apparently therefore, you simply hope *we* “understand” like you suppose to “understand” that the material of which “money” is fabricated is the issue; and that gold is just somehow the answer. How could this possibly be true? We can hardly “understand” such a thing without comprehensive analysis of the issues at hand:

        First of all, you quote me:

        “First of all, conducting what (at most) will only be a mere fraction of our overall trade will certainly not solve the fundamental issues of the present obfuscation of our currency.”

        With this you propose that you agree, for reasons which are neither expressed nor qualified as we would a proof of a veritable theorem (which might in turn comprise an equivalent of monetary science which any of us can assess to be a prevailing observation). But it appears we have a fundamental misunderstanding, largely at least from the disposition of both your article and your reply. You appear at least (because of the scope of your article and reply is restricted to this purported remedy) to believe that gold solves our problems nonetheless — regardless of the fact your proposition will likely be exercised by few if any.

        But quite likely then we don’t agree on this first statement. What I meant to be understood (from the rest of my post as well) was *both* that the finite quantity of gold can hardly sustain all our trade (much less the much greater volume of trade we might enjoy in a truly repaired “economy”), resolve our debts, resolve our contractual commitments, OR provide a consistent value to a relatively fixed volume of currency pitted against a need to perpetually and immutably represent volumes of production inevitably vacillating widely from an initial valuation.

        This of course breaches one of the most important principles which even gold bugs cry out against, that we somehow suffer circulatory inflation… and that this is the cause of our present problems.

        That claim however is widely amiss, for *by definition*, if we suffered circulatory inflation, the circulation would exceed the remaining value of all represented property.

        Obviously, this is not the case, for instead we suffer a grossly deflated circulation.

        Thus, claims of circulatory inflation cannot possibly explain the present conditions; NOR HOWEVER could some arbitrary volume of circulation, far below in fact the present deflated volume, possibly serve to solve deflation.

        What is the cause of this deflation?

        To find the cause, you have to bore down at least to the very fundamental mechanics of any proposed currency, for nothing less can turn up whatever explains our present predicament. Nothing less too therefore can pave a way to solution, that very identification of the problems we must solve.

        WHEN you bore down to the fundamental mechanics of the present obfuscation of our promissory obligations, you will turn up that problem.

        So what is it? That our promissory obligations weren’t rendered in some exceedingly expensive material, the purported processes of which don’t even actually advocate a perpetual standard (for the last thing advocates of “honest money” or “constitutional money” would want is a return to the “constitutional value” of gold)?

        There is no veritable argument for gold solving our problems (even on the least scale), because the present obfuscation of our promissory obligations imposes the only two crimes against us which precipitate in our present predicament.

        How is that?

        First of all, we do not borrow money from banks: Banking systems instead merely publish evidence of our promissory obligations. Issuing this evidence in gold or silver or platinum or plastic or paper matters not. What matters is the obfuscation.

        Why?

        For the only two issues imposed by their obfuscation, two huge crimes are imposed upon us which inevitably precipitate in the present predicament:

        1. Because the banking system gives up no lawful consideration which equates to a debt to the banking system (which merely publishes evidence of our promissory obligations *to each other*); because the real creditor (who gives up property for the promissory obligation) is paid in full from the outset of any resultant arrangement (and is denied interest by the purported banking system); and because the resultant obligation therefore is to pay and to retire principal from circulation at no less than the rate of consumption or depreciation of the related property…

        Therefore we do not borrow money from banks; they merely publish evidence of our promissory obligations to each other (absorbing no more than the negligible costs of publication); and therefore, particularly as the principal isn’t even a property of the bank, interest is entirely unjustified and unwarranted: The banking system in fact then has merely intervened upon our commerce, insisting our promissory obligations be issued on its paper, even subject to interest.

        THE FIRST MONUMENTAL CRIME AGAINST US THEN IS THAT THIS OBFUSCATION OF OUR PROMISSORY OBLIGATIONS LAUNDERS ALL THE PRINCIPAL EVER SO CREATED INTO THE EVER UNWARRANTED AND UNJUSTIFIABLE POSSESSION OF THE PURPORTED BANKING SYSTEM.

        2. THE SECOND, EVEN MORE MONUMENTAL CRIME AGAINST US THEN, is that the unwarranted exploitation of our promissory obligations to each other as subject to the unjustifiable imposition of interest, comprises an implicit obligation to maintain a vital circulation. Why? We are compelled to pay PRINCIPAL + INTEREST out of a circulation which at most can be comprised of no more than SOME remaining principal. THUS WE CANNOT EVEN PERSIST IN SERVICING ANY INITIAL OBFUSCATED “DEBTS” (promissory obligations TO EACH OTHER) WITHOUT PERPETUALLY BORROWING BACK INTO CIRCULATION WHAT SO MUCH AS PERSISTS IN “A VITAL CIRCULATION,” sufficient to sustain at least whatever industry is obligated to service an ever escalating sum of debt.

        The sum of debt perpetually escalates under an *obligatory*, perpetual escalation of borrowing therefore, because the vital circulation can only be maintained by perpetually borrowing interest and principal back into circulation. What principal we must borrow back into circulation of course then makes it mathematically impossible to pay the sum of debt down (so long as we succeed in maintaining the vital circulation); and of course then, being as what interest we must borrow back into circulation therefore counted none against a previous sum of debt, re-borrowed interest therefore increases the sum of debt by so much as periodic interest on an ever greater sum of debt until of course we suffer the present, inevitable, and terminal monetary failure.

        The issue isn’t THE MATERIAL upon which or in which the promissory obligations are evidenced. The issue is the obfuscation of promissory obligations to pay and to retire principal… into an unwarranted and unjustifiable debt to the purported banking system, which only imposes “interest” AS IF the principal were a property of the banking system (which instead, has merely created evidence of a property which belongs not to the banking system at all).

        Limiting the circulation to a finite volume of gold actually imposes further deflation upon us. Whose money is to disappear or to be defeased? How are our contractual obligations to be filled. How do we save for the future, resolve our debts, fulfill our contractual obligations, or even maintain our possession of gold as subject to those obligations, if we divide $80b (or whatever *claimed*) monetary reserves amongst 300m people to have $266.66 apiece to do so?

        Worse, still suffering obfuscated debts subject to interest, how do we avoid the inevitable, terminal culmination of any plausible process of *maintaining* a vital circulation all the while?

        You do not solve our problems. In fact you haven’t even mentioned them. And now the authority by which you purport to do so denies my arguments even make any sense.

        In 1983 I provided the Reagan Administration with computer models (which you can still download from my pages) which projected from the very described process that the present lie of economy would reach its terminal failure at approximately 2010 AD.

        If you would like to defend your bitcoin proposition and your assertion my arguments make no sense… stray wide of the mark… and so forth, I invite you to be a guest on my radio show. I have a 3-hr time slot which, owing to preferential treatment, is often extended to as much as 7 hours. That ought to give you plenty of time to argue your claims serve us.

        Meanwhile, neither are your transactions truly untaxable. They are not even a real invention (for neither gold nor computerization are inventions; and even despite 1,024-bit encryption, transactions are traceable any time their end must interface with the regular system), much less then is bitcoin the most important or most dangerous invention in history, because there isn’t even a good reason to adopt it across the world. Worse perhaps, in failing to solve inherent, irreversible, and therefore terminal multiplication of artificial indebtedness by interest, and in imposing dramatic deflation (versus protecting us from inflation), broad adoption would mean a speedy end to “the economy.”

        Now, if you really wanted to save the world, we’d have to wonder why you aren’t advocating solution instead. As for myself, if yours were my proposition, I wouldn’t expect not to land in jail even for as much as another 2 years. No one is going to beat the present plutocracy. The only goal which serves us will be a restoration of justice — which certainly will mean to eradicate the present exploitation of our right to issue promissory obligations free of exploitation.

        So, if you would like to defend your proposition(s), you are welcome to be a guest on TNSRadio (“mike montagne on mathematically perfected economy and absolute consensual representation”). Skype me at my public Skype ID: pfmpe2012.

        • David

          All of these nit wits who consider themselves experts in Economics remind me
          of this former Union Backhoe operator whom i hired to help me do the foundation
          work when i was building my new place here. We were digging in the sewer line,
          which by all standards needs to have a slope of between 1/8 and 1/4 inch per
          foot, so for the sake of function i decided to make it 3/16 th’s. This nit wit
          had been taught some rule in union school about positioning the bubble on the
          level at a certain point off from center in order to obtain the proper slope. I
          noticed that what he was doing didn’t look right and picked up the level along
          the pipe until the bubble was in the middle, over the 4 foot length of the
          level, he had a drop of about 1/16th of an inch, in which case the whole damn
          system would have backed up every time someone flushed a toilet.

          I asked him, on the 4 foot level how much of a drop the line should have if
          the level were straight from one end to the other. He hemmed and hawed, and i
          finally said with a slope of 3/16 inch per foot, shouldn’t it be 3/4 inch ?,
          and he agreed. I got a small piece of 3/4 inch plywood, and placed it under one
          end of the level and dug the pipe into the ground until the bubble was
          centered. He then took the piece of plywood out from under the one end of the
          level, placed it directly on the pipe, said this is wrong, the bubble isn’t in
          the right place, and wanted to bring it up again. At that point i told him to
          go home, and i proceeded to dig in the remaining 70 feet of sewer line myself.
          Early the following day he hadn’t shown up because he was home sulking, and 3
          young Mexican boys showed up looking for work. I gave them a rake and two
          shovels and instructions on what needed to be done, i found they could move
          more dirt in a day and do it much more accurately than the Union guy could with
          the big machine, they didn’t know too much about construction, but they
          listened to what i asked them to do and did exactly as instructed, so they
          didn’t have to spend 80 % of their time fixing mistakes. I fired the Union guy
          and kept the 3 Mexican boys and the job got done and now that it is, everything
          works perfectly.

          Here we have economists, with education and theories on money, and expecting
          that people will trust and believe in them because of their education when all
          they understand is the bullshit they’ve been taught about money and have absolutely
          no clue or understanding of the trade and production we need it to facilitate,
          without which America ceases to exist, and will very shortly if we don’t get
          this right. They think that more money = less value, and that restricting our
          trade to scarce and finite commodities will ensure that the money maintains
          value, irregardless of the fact that they are willing to tolerate Banking and
          money as a business in which case the money will have value but will be saved
          out of circulation within a month shutting down our trade and production
          completely.

          This is what you nit wits need to understand !. I own and operate and
          engineering / manufacturing business. If you come to me and want me to
          manufacture one of a particular item for you, the price on that item for the
          sake of argument will be $ 5,000.00. If you line up 100 other people who need
          and can afford to buy the same thing, i can use the same machine set ups to
          make the same parts 100 times over and then the price for each of you will be
          down to $ 500.00. In the first instance, $ 5,000.00 had to be created or appear
          from someplace in order to pay for the one item, so each one of those $
          5,000.00 had very little value or purchasing power. In the second case $
          50,000.00 had to be created or appear from someplace, but each one of those
          dollars had 10 X the purchasing power of the original $ 5,000.00. If my market
          expands to one million people who need the same item, then i can afford to
          build dedicated production tooling and look at automation of the process, in
          which case i’ll most likely be able to produce the same item for $ 50.00 a pop.
          In this case, $ 50,000,000.00 will have to be created or come from someplace to
          buy the million items, but the value of each of those dollars will be 100 times
          what they were with the original $ 5,000.00, and the money will simply keep
          increasing in value until my production capacity is actually exceeded, which
          with today’s level of technology would be next to impossible.

          So much for every single ounce of all of this stupid economic theory and
          religion that people are being asked to trust and believe in on here. This is
          the real world that we live in people, and we are fully capable of creating a
          standard of living 30 times what it has ever been in the past, provided that we
          do not remain so incredibly stupid as to believe that money can be a business
          and facilitate trade, and create it for ourselves as a public service so we can
          actually make it do that. We have only one problem, and that is this bigass
          huge parasitic infection called Banks, who don’t build anything, fix anything
          or feed anyone, who rape the population of its productive effort with the
          business of money, usurp control of our government from the people to whom it
          belongs in order to help them do this, and will finally turn America into the
          same f’ing socialist police state that they have turned the rest of the world
          into by now as well. If we leave things alone, this will happen in the next
          couple of years, if we listen to all these idiot Austrian theorists on here, it
          will happen within a couple of months, and if we think for ourselves, use our
          own minds, reason and common sense, and turn the matter over to the people who
          actually live and work in the real world and understand the single and only
          useful function we need money for then it will never happen.

          “We hold these truths to be self evident” and anything which exists on the
          basis of faith and trust and cannot be demonstrated through practical example
          to provide function is guaranteed to be a lie. Something which time and time
          again they have all failed to do miserably.

        • gcallah

          “THE FIRST MONUMENTAL CRIME AGAINST US THEN IS THAT THIS OBFUSCATION OF
          OUR PROMISSORY OBLIGATIONS LAUNDERS ALL THE PRINCIPAL EVER SO CREATED
          INTO THE EVER UNWARRANTED AND UNJUSTIFIABLE POSSESSION OF THE PURPORTED
          BANKING SYSTEM.”

          Anyone, any time they want, can stop dealing with the “purported” banking system. Just go get your house straight from the seller and work out the borrowing straight with him. No one is being stopped from doing this.

      • David

        All of these nit wits who consider themselves experts in Economics remind me
        of this former Union Backhoe operator whom i hired to help me do the foundation
        work when i was building my new place here. We were digging in the sewer line,
        which by all standards needs to have a slope of between 1/8 and 1/4 inch per
        foot, so for the sake of function i decided to make it 3/16 th’s. This nit wit
        had been taught some rule in union school about positioning the bubble on the
        level at a certain point off from center in order to obtain the proper slope. I
        noticed that what he was doing didn’t look right and picked up the level along
        the pipe until the bubble was in the middle, over the 4 foot length of the
        level, he had a drop of about 1/16th of an inch, in which case the whole damn
        system would have backed up every time someone flushed a toilet.

        I asked him, on the 4 foot level how much of a drop the line should have if
        the level were straight from one end to the other. He hemmed and hawed, and i
        finally said with a slope of 3/16 inch per foot, shouldn’t it be 3/4 inch ?,
        and he agreed. I got a small piece of 3/4 inch plywood, and placed it under one
        end of the level and dug the pipe into the ground until the bubble was
        centered. He then took the piece of plywood out from under the one end of the
        level, placed it directly on the pipe, said this is wrong, the bubble isn’t in
        the right place, and wanted to bring it up again. At that point i told him to
        go home, and i proceeded to dig in the remaining 70 feet of sewer line myself.
        Early the following day he hadn’t shown up because he was home sulking, and 3
        young Mexican boys showed up looking for work. I gave them a rake and two
        shovels and instructions on what needed to be done, i found they could move
        more dirt in a day and do it much more accurately than the Union guy could with
        the big machine, they didn’t know too much about construction, but they
        listened to what i asked them to do and did exactly as instructed, so they
        didn’t have to spend 80 % of their time fixing mistakes. I fired the Union guy
        and kept the 3 Mexican boys and the job got done and now that it is, everything
        works perfectly.

        Here we have economists, with education and theories on money, and expecting
        that people will trust and believe in them because of their education when all
        they understand is the bullshit they’ve been taught about money and have absolutely
        no clue or understanding of the trade and production we need it to facilitate,
        without which America ceases to exist, and will very shortly if we don’t get
        this right. They think that more money = less value, and that restricting our
        trade to scarce and finite commodities will ensure that the money maintains
        value, irregardless of the fact that they are willing to tolerate Banking and
        money as a business in which case the money will have value but will be saved
        out of circulation within a month shutting down our trade and production
        completely.

        This is what you nit wits need to understand !. I own and operate and
        engineering / manufacturing business. If you come to me and want me to
        manufacture one of a particular item for you, the price on that item for the
        sake of argument will be $ 5,000.00. If you line up 100 other people who need
        and can afford to buy the same thing, i can use the same machine set ups to
        make the same parts 100 times over and then the price for each of you will be
        down to $ 500.00. In the first instance, $ 5,000.00 had to be created or appear
        from someplace in order to pay for the one item, so each one of those $
        5,000.00 had very little value or purchasing power. In the second case $
        50,000.00 had to be created or appear from someplace, but each one of those
        dollars had 10 X the purchasing power of the original $ 5,000.00. If my market
        expands to one million people who need the same item, then i can afford to
        build dedicated production tooling and look at automation of the process, in
        which case i’ll most likely be able to produce the same item for $ 50.00 a pop.
        In this case, $ 50,000,000.00 will have to be created or come from someplace to
        buy the million items, but the value of each of those dollars will be 100 times
        what they were with the original $ 5,000.00, and the money will simply keep
        increasing in value until my production capacity is actually exceeded, which
        with today’s level of technology would be next to impossible.

        So much for every single ounce of all of this stupid economic theory and
        religion that people are being asked to trust and believe in on here. This is
        the real world that we live in people, and we are fully capable of creating a
        standard of living 30 times what it has ever been in the past, provided that we
        do not remain so incredibly stupid as to believe that money can be a business
        and facilitate trade, and create it for ourselves as a public service so we can
        actually make it do that. We have only one problem, and that is this bigass
        huge parasitic infection called Banks, who don’t build anything, fix anything
        or feed anyone, who rape the population of its productive effort with the
        business of money, usurp control of our government from the people to whom it
        belongs in order to help them do this, and will finally turn America into the
        same f’ing socialist police state that they have turned the rest of the world
        into by now as well. If we leave things alone, this will happen in the next
        couple of years, if we listen to all these idiot Austrian theorists on here, it
        will happen within a couple of months, and if we think for ourselves, use our
        own minds, reason and common sense, and turn the matter over to the people who
        actually live and work in the real world and understand the single and only
        useful function we need money for then it will never happen.

        “We hold these truths to be self evident” and anything which exists on the
        basis of faith and trust and cannot be demonstrated through practical example
        to provide function is guaranteed to be a lie. Something which time and time
        again they have all failed to do miserably.

        • http://fascistsoup.com/ Michael Suede

          I think you are confused.

          Austrians want to end the fed and kill the centrally planned banking economy.

          Before commenting, you should actually learn about what you are commenting on.

          Either you are confusing Keynesian economists with Austrian economists or you are willfully ignorant of Austrian theory.

        • http://toughtoughtough.myid.net/ Johnny Tough

          …so are you for or against BitCoins….no joke?   For or Against?

  • Dcanard

    Hi Michael,

    To myself I make a qualification about applying the term “untaxable” to Bitcoin transactions.

    Certainly when transactions stay entirely within the Bitcoin realm online they will be untraceable and untaxable.

    Currencies can be used to procure virtual goods & services, and Bitcoin can be great for that, but mostly we need to use currencies for real-world goods & services. That means either exchanging Bitcoins for physical stuff, or exchanging it for national currencies so we can take the dollars or euros, or whatever, to pay real-world people who don’t accept Bitcoins, and this is where the tax people will come for you. They’re not going to change their tax regime just because you’ve got a way to use your computer to hide assets from them. I think of Bitcoins as supercharged cash that has properties similar to national currency cash, but can be given and received in much more powerful ways. The same techniques will work against digital cash just as handily as they have against physical cash users, offshore account holders, people with double sets of books, and the various other types of people who have tried to maintain their privacy against the taxers.How does it work?  Well, you need stuff (stereos, computer parts, a loft, a car, groceries.) and they’ll spy on you to see if your ‘lifestyle’ can be possible on the kind of income you’ve reported to them. So go ahead, send Bc80.000 to a guy for his Audi R8 that he’s selling to you at a great price! But you better be sending enough dollarcoin the IRS’s way if they get interested in you and see that sleek ride pulling out of your driveway . . . you also better have a mechanic who’s close enough to you, and a self-employed individual, so that he can alert you if the IRS walks in and demands the v.i..n. and service records of your luxury ride!

    Just as there always have been casualties among the population of people who use old-school techniques to remain anonymous and untaxed, there will be people who get caught using Bitcoins, so yes, while it will be much harder for the gov’ts of the world to tax Bitcoin transactions than possibly any other type of anonymous transaction, they will be out there trying to round the tax avoiders up, and they will succeed against a significant number of people.  So, yes, Bitcoins are untaxable online, but they most definitely are taxable in the kind of real-world situation most people will eventually be tempted to use them for.

    • http://profiles.google.com/justindkeith Justin Keith

      While what you say is true, if the costs can be raised significantly for the IRS, they will be unable to catch enough people.

  • Dennis W.

    1. “Bitcoins CAN NOT BE ARTIFICIALLY INFLATED.”

    2. “Total Bitcoin production will TOP OUT in the future meaning NO NEW BITCOINS WILL BE CREATED BEYOND A CERTAIN DATE.”

    3. “If you have additional
    concerns, please take the time to research the answers on your own.  
    Don’t blindly dismiss it because of a concern that could easily be
    addressed with some simple research and questioning of those who are
    current users of the system.”

    The first two statements are arbitrary assertions with NO attempt made to prove them (but plenty of obfuscation regarding encryption which is a completely different issue). As for the third statement, YOU are asserting that Bitcoins are a value, YOU should provide convincing proof. It is not for ME to do the alleged “simple research”. I find it particularly interesting that you take pains to deny that it is a PONZI scheme, but provide nothing as proof of your denial. 

    To those who jump in, good luck.

    Dennis W.

    • http://fascistsoup.com/ Michael Suede

      You are an idiot Dennis.

      The first two statements are explicit fact and can easily be verified by a simple Google search.

      Further, Bitcoins have value because the market says they have value. I can exchange 1 coin for nearly 30 dollars right now. That is also a verifiable fact. You don’t need to take my word for anything. See the sidebar of my blog for current market prices of Bitcoins.

      • Dennis W.

        Oh, well. I guess your assertion that I am an idiot settles all questions about artificially inflated and explains how it is possible that no new Bitcoins “WILL” be created.

        As for the “market value”, the same chart is available for that wonderful commodity, the US Dollar. And Chairman Ben has asserted how wonderful HIS money is. But, like the idiot that I am, I notice that HE doesn’t bother to provide convincing proof for HIS assertions either.

        • http://fascistsoup.com/ Michael Suede

          Dennis, if you want to claim bitcoins can be artificially inflated, go review the source code and get back to me with the code snippet that makes this possible.  It’s all open source.

          Until then (I happen to be software developer), I trust that there is no possible way this can happen because I can see the code for myself an because thousands of other people have reviewed it and have come to the same conclusion.

          Thus, your nonsense is just that – nonsense.

          • Dennis W.

            I “happen to be” a software developer also. So I am NOT intimidated by your claim to authority.  Even Phil Zimmerman, who developed the popular PGP encryption program, doesn’t claim that “there is no possible way” to break PGP. It would just be very difficult and expensive.

            Furthermore, I am not required to disprove anything. YOU, who is making the assertions, are expected to back up your assertions with some real, convincing evidence. If you cannot do so–or worse, actively EVADE doing so–then YOUR assertions are highly suspect.

          • http://fascistsoup.com/ Michael Suede

            Well Dennis, the NSA disagrees with your assertion that SHA 256 can be broken.

            If it is secure enough for the NSA, I consider it secure enough for me.

            Since SHA 256 has never been broken, I stand behind my claim that bitcoins can not arbitrarily be inflated.  

            If at some future date SHA 2 becomes compromised, a currency change over to one that utilizes SHA 3 will take place. SHA 3 doesn’t even exist yet.

          • Dennis W.

            Michael, I never asserted that “SHA 256 can be broken”. Besides EVADING the original points I made about YOUR unproven assertions, you have now sidetracked the discussion completely away from your problem.

            “If it is secure enough for the NSA, I consider it secure enough for me.”

            I find it very interesting that an alleged “Austrian” and “libertarian” feels secure with what the government agency NSA says.

          • http://fascistsoup.com/ Michael Suede

            You came in here stomping your feet demanding proof of everything while offering nothing in refutation.

            If you want proof, go dig it up yourself.  I am not your research assistant.

            I am putting out good information and if you think it is wrong, feel free to show others why it is wrong by refuting me.

          • Dennis W.

            Michael,

            I was linked to your article because I am interested in Bitcoins and wanted to know more. I have an on-line business and I am looking for a replacement for eGold and electronic Liberty Dollars, both of which were destroyed by the USA government. Bitcoins “MIGHT” be a good replacement. Unfortunately for me, yours was the first article I read about it, and it contains assertions without proof or links to proofs.

            Dogmatically repeating assertions in upper-case red letters does not make them facts anymore than the following (without the RED color):

            “SANTA CLAUS EXISTS AND IS A REAL PERSON AND THAT IS A FACT!”
            For proof, google “santa claus” and then research the “About 50,800,000 results” and then prove to me that it is false. The New York Times published an excellent article on Santa Claus and that is good enough for me. This is “good information and if you think it is wrong, feel free to show others why it is wrong by refuting me.”

            You very seriously need remove the chip from your shoulder and to study the scientific method.

            Dennis

          • http://pulse.yahoo.com/_IVGHCJO2JS7Q6SPKCQCZ43UX3Q B

            Dennis, are you really a software engineer?  Did you ever study encryption?  Have you ever worked with algorithms used to encrypt data?  Do you grok SHA 256?

          • Dennis Lee Wilson

            Yes, yes, yes and yes I grok.
            Did YOU read my posts? *I* never challenged the encryption.

          • Dillyriffic

            What a stupid thing to say
            “I find it very interesting that an alleged “Austrian” and “libertarian” feels secure with what the government agency NSA says.”
            Surely, you would recognize that even Austrians think that the government’s ability to cover stuff up is pretty good. Just because you don’t want the government doing it doesn’t mean that it’s impossible for the government to do it. Just because you believe the government doesn’t do it efficiently doesn’t mean that the government can’t do it at all. Governments aren’t so stupid that they can’t make simple assertions. They still have educated people working for them, the idea that the NSA wouldn’t have qualified software engineers and such is idiotic.

          • http://profiles.google.com/justindkeith Justin Keith

            The limit to breaking encryption now is becoming the electricity necessary to get the compute cycles. It’s easier to just threaten or hack humans than it is to break the ECC and SHA256 (as far as we know).

    • http://profiles.google.com/justindkeith Justin Keith

      Bitcoins are currency by consensus. In order for a transaction to be accepted as valid, it must conform to the rules laid out ahead of time. If people want to change those rules, they must change their clients or fork future bitcoin transactions into a new chain.

      Bitcoins are as secure as elliptical curve cryptography is. I trust math more than I trust people. So long as the cryptography is secure, and the rules for their creation are agreed to, then the bitcoins cannot be inflated beyond the agreed-upon amount at at approximately the agreed-upon rate.

      Bitcoins have value to individuals if those people value them – that’s a tautology. I deny intrinsic value with anything, including bitcoins and gold. While things may be useful for certain ends, I deny that that makes gives them value unless that end is itself valued and, even then, only to those specific valuers.

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  • DrGizmo

    Excellent article, there are three or four key reasons for “incorrect thinking” they are ignorance, ( not educated ) this condition can be fixed with education and understanding,  the second is stupidity, just not smart enough to understand, this is a genetic condition and can not be fixed, it just is… the third is unfortunate buy to is … foolishness… commonly known as 1d10t syndrome… people who do know better, but refuse to acknowledge the truth…and the final is evil… know and understand but act contrary to logic and reason for the own selfish, mysterious motivations … only a god knows.

    Any way i agree, with you but for me, the reason is/are… this is the tool needed to monetize the net… it is the thing we have (all) been waiting for … it is the heat the energy we need to pay for the information, available on the http://www.  It is mightly divisable, it is or soon will be instant, it is the way out of the mess we are in, it is the only currency not burdened with debt…  and never will be… (controlled by rules of math and not of man) it is the tool that will change every thing… it will prove to be the climax system to support an honest open system all most impossible to corrupt… to put it another way it is a perfect good…in every way.

  • Iain Blake

    How do you begin mining?

  • gcallah

    Sorry, it’s the Segway that is the most important creation in the history of man.

  • gcallah

    Sorry, it’s the Segway that is the most important creation in the history of man.

  • mustafa

    MARIJUANA 4 BITCOINS

    http://xlvbli7pmkw652f6.onion/

  • Btc-direct

    If you need Bitcoin easely, got to http://www.btc-direct.fr
    And purchase your Bitcoin by phone or sms.
    Trasnfer to your Bitcoin address is immediat.

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  • Daniel Beaulieu

    nice article

  • Ben Reeves

    Nice article. As an alternative to managing your own wallet have a look at https://blockchain.info/wallet.  It is pure javascript and encryption is done browser side.

  • bibo

    i’d like to see a bit mine one day….

  • almo2001

    Calling you on your prediction that the US Dollar would collapse in around 2012. http://forums.randi.org/showpost.php?p=8470456&postcount=892

  • bugyell

    HELP! I’m in the UK and I can’t seem to be able to purchase or use Bitcoins to use on ‘a certain site’. Anyone out the from Great Britain who can take me through the system? I’m being driven mad here. I have downloaded Bitcoin QT and I have accounts with Instawallet, Blockchain and Mt.Gox. Step by step instructions wouldf be good as I suffer from ADD. Thanks in advance!

  • http://twitter.com/kartsgo Pamela Osborne

    I want to use bitcoin but a $17+ bucks each they seem a bit pricy… What if I wanted to buy something for $5.00 can I send them 1/4 bitcoin? I think not….

    I think the founder didn’t put much thought into things when they created this ‘rich man’ digital money thingy…

    just my 1/64 bitcoin, ah not sure what equals 2 cents…

  • http://twitter.com/kartsgo Pamela Osborne

    Whoo!!! I just read your comment (Michael Suede) from 2 years ago that you could sell a bitcoin for 30 bucks.. Now they are only worth $17ish. WTH happened? So if I sit on my coins for a time they will decrease in value?

    That’s worse then I stated in my first comment that I cant buy a $5 item with them…

    Now I’m reading about the mining….

    This seems to be a VERY flawed system!!!!!

    Please explain…

    • http://www.libertariannews.org/ Michael Suede

      IIRC they were driven up in value by a Wired article on the Silk Road. When a lot of people want to get their hands on the coins at the same time, it will cause a supply shortage and the value will spike. Kind of like how you can sell bottled water to hurricane survivors for 10 bucks a bottle. High prices is the market’s way of rationing goods.

      It’s certainly possible that you will lose money on holding bitcoins, but I doubt it. Prior to bitcoins being worth 30 dollars a coin, they were worth a few dollars per coin. The people who bought when they were worth a few dollars became millionaires. In the long run, most likely we will see bitcoins act like gold due to their supply structure.

  • http://twitter.com/emondpph Pierre-Philippe

    Bitcoins are today 75-80 USD …

  • jerry lewsi

    I am currently selling bitcoins at discount prices, as i am going out of business, and am trying to cash out on all my bitcoins ive earned. I have 100+ bitcoins. right now I am selling them for 125/BTC. The value right now according to Mt.Gox, is 160.59/BTC. I accept western union moneygram, or money transfer. If you are insterested in purchasing some btc, please get ahold of me at [email protected]

  • Osyp

    I would have never figured out how to use bitcoin. There’s no way you can know how to use it without someone showing/telling you how to do it.

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