Crypto currencies are even worse than money in at least one thing: its incredibly hard to understand how todays money economy works to begin with, and there are many viewpoints on how it REALLY works in reality (if you call the current economy "working")...

Crypto currencies are even worse... now not even a mathematician might be able to tell how it is really working, its inner workings are intentionally obscured from sight. And even how it is supposed to work on a higher, economical level is kinda obscure, enough so that again, the normal citizen will have no chance to understand it...

And again, never invest in what you do not understand (which is why 90% of the population shouldn't even try to use money).

I think this is confusing two things - the workings of an economy, and the mechanism by which something works. It's like saying you shouldn't have money if you don't know how the money is printed, or invest in gold if you don't know how gold is mined.

Well, what I meant was:

If you don't understand how credits / debits work... don't apply for a credit. If you don't know how the stock market works... don't trade.

Don't buy shares of a company producing goods you don't know, operate under a model you don't understand, trade with things that are alien to you.

Don't invest into currencies if you don't know how the international exchange works.

Don't spend money if you lack the ability to watch your bank balance and avoid going into debt.

I might not have been clear enough, but yes... there are MANY people that should not be allowed to use money. Because they lack the ability to judge how much they are able to spend without spending too much. You know, the people who are adamant they need 2 cars when they can hardly afford one. That forget that buying the car is only part of the spendings they will do. That forget to calculate the cost of gasoline, repairs, the parking space.

That are unable to see how buying a used car for 2000$ that might break down after a week is NOT a good deal.

You don't need to understand the last bit of economics or have a PhD in it to be able to "understand" something. But you need to do your homework, and invest some time and brain into something before you go all out and buy that overvalued share, invest big into bitcoin mining when the cost of the equipment and electricity is far larger than what you can make in 1000's of years with mining, buy that second car you can never afford with your low wage.

In case of cryptocurrencies though, you need to understand how the system works, on a basic layer. That would tell you a) mining was only a good idea in the first few years, until mining became unprofitable even on GPUs, b) buying bitcoins to MAKE MONEY is a bad idea because of the hyper-fluctuations of its value, c) the whole concept is still forming, and we don't know if the concept itself will survive (because governments and financial institutes worldwide are not amused), or which of the cryptocurrencies will survive (bitcoin might not be the one)...

I will not even go into how the whole thing is built on trust alone, and completly at the mercy of hackers should an exploit be found as there is no-one backing it.

In short, it would tell you that while its an interesting new concept, and one of the only ways of getting away from the current financial system while still being able to buy something with it, you should probably be VERY careful on how much you invest into bitcoins.

Again, I am not saying you need to understand on how the blockchain works on a technical or mathematical level... but you need to understand at least on a larger scale what systems drive it, for example that there is NO central authority and thus NO backing of your investment should anything go wrong, no way to recover money lost due to a hardware or software failure, or if your wallet gets hacked.

If the extent of your IT knowledge is how to turn on your computer, stay the hell away from bitcoins!

So what did your bank say to you when you asked it if you could deposit cryptocurrency?

-

There are two banks that accept Bitcoin in Germany and one online only bank in the UK. There a couple of other online only banks getting ready to launch that have said they will accept Bitcoin.

The Metro high street bank in the UK also tried to start accepting crypto-currencies but, as they are underwritten by Barclays they were blocked by Barclays.

Since then Barclays have actually started working with a a startup that does let you deposit Bitcoin into your Barclays account but, they are very keen to point out that it is a third party service that you are using and not part of the bank itself and that the money is converted into sterling first with no bitcoins ever being held within their banking system.

As for the future well I know from personal experience that several international banks are actively working either on their own Blockchain technologies or with third parties such as Etherium. This could actually be a problem for Bitcoin as it is likely that the banks would just agree to launch their own crypto-currency.

The Bank of England has already developed their own crypto-currency called the RSCoin.

As for weather or not it is important for a bank to accept a crypto currency or not well that depends on which Futurologist you listen to.

So basically you're talking about negative interest rates - this is already a reality in some countries ( http://www.bbc.co.uk/news/business-32284393 ).

The closest thing to what I'm talking about is called "helicopter money". "Negative Interest Rates" refers to something else. Those articles always confuse and mislead people. Here is what "negative interest rates" really is (from the same article):

"In effect, private sector banks have to pay to park their money."

"As things stand, anyone who doesn't want a negative interest rate on their bank account does have an alternative in the shape of hard cash."

The idea (from Central Lenders) was meant to be a way to keep money in circulation (not to give away money - they just added fees to money that sat around).

-

What I'm pointing out is that debt is greater than inflation. Poverty becomes mandatory under those conditions (because everybody needs money - but there is more debt than money). There is no solving "extreme poverty" until this issue is addressed. It can be addressed because in actuality the Lender is overvaluing themself while the rest of the community is undervaluing itself.

-

Just another note on crApto-currency. It's just money sitting somewhere else. It's protected by nothing. No one can create any credit, 'yet' (if they could it would be chaos). There needs to be a central authority for this to work - but a central authority (the Central Lender) already exists and it doesn't care what your made up currency is called - it's got its own.

Bitcoin isn't made up, it exists.

...

they don't need to be protected.

...

Calling it "crapto" isn't much of an argument.

:D I make fun of the word. I know people have put real money into those things. If a friend told me they did that, I'd tell 'em to get their money back as soon as possible. It is not official currency. Official currency is the only currency that really matters at the end of the day. Where the money that buys altcoins actually goes is anybody's guess.

people don't create credit with gold

Believe it or not - that is how "paper-money" got started.

though the lack of a lender of last resort may make that unfeasible.

I'm starting to think nobody is reading my posts. "Lender of Last Resort"? Haven't seen/heard that term used in a very long time.

In principle credit could be created in the same way that non-central banks do it for other currencies, by lending out Bitcoin that people have deposited

Okay, now I'm certain nobody is reading my posts.

If people could independently create "credit" with altcoins, "mutual credit", their value would become meaningless instantly.

This is starting to get annoying.

People, you need to focus.

Banks have their own thing, called "money". Governments look at altcoins and say "No, I want money." If you're trying to hide taxes through altcoins, authorities will pursue it.

-

they can't just keep printing money, as that devalues the currency.

*sigh* Why won't you read my posts? I have already explained the irony of this. >100% Debt = Hyper Deflation = Hyper Inflation.

You have to wonder where does the money to pay the 'interest' comes from. When you figure that out, then you'll understand.

-

Does nobody have any more questions? No? Oh, good. That means everybody understood perfectly and are all motivated about a prosperous future.

BR

@Gian-Reto Yes sure, I wouldn't expect people to handle Bitcoin without understanding how to use them on a basic layer, as you say. I just disagreed that this is beyond "even a mathematician", or that "the normal citizen will have no chance to understand it".

As with any high risk investment, one should consider how much to invest, but that doesn't mean one should never invest anything. High risk investments can be a way to make money, as long as you're prepared to live with losing it (a reasonable policy is to have some investments in higher risk investments - too much is a bad idea, but everything in safe investments means little return).

@BrianRhineheart: Bitcoin isn't made up, it exists. I would compare Bitcoin more to things like gold; they don't need to be protected. In principle credit could be created in the same way that non-central banks do it for other currencies, by lending out Bitcoin that people have deposited - though the lack of a lender of last resort may make that unfeasible. But who cares, the fact that people don't create credit with gold doesn't stop investments in it.

Calling it "crapto" isn't much of an argument.

Well, you CAN do high risk investments of course. People DO make good money with it, possibly you will too.

But: for 90% of people, high risk investment is a bad idea. Why? Because you need to put a certain amount on the line before the pay off is actually worth the risk.

If you have 100k$ on the bank, you might be able to afford loosing 10k$... you put that on the line. Any SANE high risk investment might net you 2000$ dollar profit to maybe doulbing your investment.

Are 10k$ profit really worth loosing 10k$ of your small savings? What could you have done with those 10k$? Maybe, down the line, those 10k$ would have made the difference between being able to afford the mortgage for your house or not.

If you have 20 million $ on the bank and live a modest lifestyle, or have 100 millions, loosing even 100k$ will hardly make a dent in your savings. You don't need mortgages to buy a house, your savings are big enough to loose even a million and not care about it.

If you now win a million by risking a million, that is quite a profit. You can live of that million 5 years, maybe 10, maybe 20.

How long can you live off 10k$?

That is why high risk investment is a bad idea for MOST people.

Getting back ontopic though:

If you believe the coarser details of the bitcoin system is NOT outside of the grasp of the average citizen, you give the average citizen too much credit.

Given how the US economy was blowing up because of the credit crisis I'd say at least in the US, there is a vast majority which has little grasp about how the financial system works.

Sure, the main culprits where the banks handing out those credits like candy. But the guy on the receiving end also had the possibility to say "no", because if he had any common sense, he would have thought "hey, at some point I will need to pay back that credit. Sure, I can get another credit to pay back the first credit. But where is this going to end? The interests will start adding up. And what if the system stops working and I will actually have to pay up all my debts before I die?".

And I would guess its not just the US. Maybe banks outside of the US were more wary to hand out credits to people that couldn't afford them. But the general understanding of financial realities is most probably way lower than we think.

What this means for a system like Bitcoins is that for most people its a bad idea. Just as any high risk investment. You need to be able to judge how much you can invest without going into debt should it blow up. You need to be able to read the signs on when to bail out before the system crashes (every high risk system will crash at some point, history of the last crisis approves). You need to understand not only the risk, but also the potential profit (bitcoins for example will no longer make people rich, unless the price goes up again considerably... which is unlikely).

If somebody would ask me if they should invest into cryptocurrencies... I would answer "If you need to ask, no!"... if somebody would ask about investing into bitcoins I would give them a flat out "no!"... bitcoins seem to have plateaued. They might still have a purpose as virtual currency (especially for money laundering and crime financing, but that is besides the point). They no longer seem to work as high risk investment (the risk stays, but the profits are most probably gone).

Ooookay. This is depressing.

I started talking about how to end the cycle of debt, but the only thing people really want to talk about it is altcoins.

I'm not going to bother with part 2 and 3 about the future of economics.

Enjoy continuing the New Topic: Altcoins

Well, you CAN do high risk investments of course. People DO make good money with it, possibly you will too.

But: for 90% of people, high risk investment is a bad idea. Why? Because you need to put a certain amount on the line before the pay off is actually worth the risk.

If you have 100k$ on the bank, you might be able to afford loosing 10k$... you put that on the line. Any SANE high risk investment might net you 2000$ dollar profit to maybe doulbing your investment.

Are 10k$ profit really worth loosing 10k$ of your small savings? What could you have done with those 10k$? Maybe, down the line, those 10k$ would have made the difference between being able to afford the mortgage for your house or not.

Its not a bad idea. Its just that people don't understand how to do it. An ideal risk pyramid will have a small amount of your money in these more volatile high risk funds whilst the majority is invested in lower risk stuff like regular savings. Even if you don't understand them or invest in them directly there may be somebody investing on your behalf. A lot of pensions works this way, some invest in volatile stuff early on and then slowly reduce the risk as you get older to safeguard your assets.

Also in the UK we have certain financial instruments (that are illegal in other countries) that mean that you don't need to put a lot on the line but, if things go wrong you stand to loose more than you invested.

It happened last year when the Swiss decided to stop pegging their Franc against the Euro without giving any warning. A lot of people were basically wiped out in less than 5 minutes

How so? It merely caused a temporary change in exchange rate. Noticeable, yes, but far from "wiped out in minutes". The rate has regained half of that since then, with nothing being done and nothing happening (or rather, you could say despite much happening). The reason is clear, too, if you consider that the franc is backed in euros.

Because people had money (billions) invested in financial instruments that were based on the Franc being pegged against the Euro. It caused losses in every single market in Europe and also caused several funds. Several large forex traders and spread betters lost millions because everything they trade is hedged. When the price changed they couldn't hedge fast enough. Alpari went bust, FXCM lost £300 million. People with leveraged positions were obviously the most affected. There were even horror stories in the press about low paid teachers who found themselves 300k in debt from only a 10k position.

Polish banks lost billions, people lost their homes.

People are trying to offer financial advice (to me - offline) on how to get more money in an economy with a diminishing money supply. After I explain to them how the money supply (in reality) increases and decreases, they continue defending it (because they already know everything). Why are people so stupid when it comes to money? Why do borrowers keep agreeing to repay back more money than is borrowed which is "created" by the bank, when the bank can't "create" that money without the borrower? There is nothing complicated about this AT ALL. What is it about people's psychology that I'm missing here? It's like they're on auto-pilot "Yeah, you make a good point, but ya just need to keep investing, blah, blah, blah". It's like I've told a customer that they've been over paying all this time, but instead they reply "Nah, it's good. I like having less money. I like worrying about money." I feel like I'm on a Universal prank show. What is going on?