JPMorgan CEO Jamie Dimon Says The Government Will 'Stop' Bitcoin
from the good-luck-with-that dept
One of these days I'm finally going to get around to writing the piece I've been planning for the better part of a year on the importance of the blockchain and cryptocurrencies, but in the meantime, it's still fun to see the way traditional bankers try to wrap their heads around it. Apparently, for JPMorgan CEO Jamie Dimon, it's to say he's not at all concerned about it because he's sure that the government will step in and kill Bitcoin should it ever really matter:“Virtual currency, where it’s called a bitcoin vs. a U.S. dollar, that’s going to be stopped,” said Dimon. “No government will ever support a virtual currency that goes around borders and doesn’t have the same controls. It’s not going to happen.”That's kind of an incredible statement when you think about it -- a sort of direct admission that Wall Street knows how tightly it's in bed with Washington DC, that should something like Bitcoin ever challenge Wall Street's power, he has no fear that the politicians will "stop" the virtual currency.
Talk about regulatory capture...
Of course, that confidence that the US government will kill the innovation is perhaps the biggest weakness of Dimon's argument. We have no doubt that governments are already trying their damnedest to kill off innovation around cryptocurrencies, but the larger question is really whether or not that's even really possible.
Here's the problem for Dimon: should Bitcoin really reach the point at which Wall Street really views it as a true threat, then it's probably too late for it to be stopped. That's one of the (many) interesting parts about cryptocurrencies. The ability to stop them as they get more and more successful becomes significantly more difficult, to the point of reaching a near impossibility. But, it sure will lead to some amusing and ridiculous regulatory fights.
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Filed Under: bitcoin, cryptocurrency, innovation, jamie dimon, money, regulation
Companies: jpmorgan
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JP's late to the party...
Wall Street, MasterCard, Visa, and other huge financial players are already investing in bitcoin startups and blockchain technology. E.g.:
http://www.nasdaq.com/article/visa-nasdaq-others-invest-in-bitcoinrelated-startup-20150909-01388
This is likely part of the reason Bitcoin's price bounced so rapidly from the $250s to current high $300s the last few weeks (about which I am quite happy). Legitimacy.
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51% attack
That's not out of reach of the U.S. government, I don't think.
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Regulatory capture?
This isn't regulatory capture, it's governments defending their power and authority.
As to whether that's possible, I suspect it's more possible than the techno-libertarians think it is. It might not be possible to completely destroy Bitcoin, but it can be driven far enough underground to not matter for any business that's not on the black market.
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Stop bitcoin? Ha!
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history will repeat
If history is any guide, the US government will step in and bust up Bitcoin and other cryptocurrencies and throw people in jail, as previously happened with precious metal coiners such as Liberty Dollar, and precious metal electronic exchanges such as E-Gold. Criminal charges have ranged from counterfeiting (despite the coins/notes not resembling any US currency) to money laundering (despite the principals not being involved themselves) to operating an unregistered bank (despite a gold exchange not being a bank). Large amounts of Gold were confiscated from depositors as civil asset forfeiture when the operations were raided. To date, essentially all alternative currencies that emerged in the last quarter century have been forcefully shut down by government action.
In short, the US government will find some excuse, any excuse, to raid Bitcoin and other cryptocurrencies, as its continued existence poses a threat to the value of the government's own fiat currency, the US dollar.
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Re: 51% attack
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Re: history will repeat
But in either the late 1960s or early 1970s the US went off gold and silver standards, so the US stopped printing gold and silver notes; only the 'greenback' still got printed. There was also a time that it was illegal for an individual to own or possess gold; that changed in the mid '70s and one can now own and possess gold.
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Re:
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Re: 51% attack
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That's actually been true of a lot of innovations that government and traditional industries don't like
1:) The printing press
2:) The auto industry (vs horse and buggy)
3: Uber (vs taxi cab incumbents)
4:) VHS
5:) E-Mail (vs the USPS and how they complained so much about it and how the govt wanted to tax e-mail).
6:) Youtube
Corporate interests working with government have tried very hard to kill new innovations that threaten incumbent industries but as those innovations become more and more successful and entrenched in how we do things it becomes more and more difficult to destroy them.
Having said that there are a few stories of innovation being killed by entrenched industries pulling governmental strings for no good reason other than to protect industry interests from competition.
1:) Megaupload
2: Veoh (the original) even though this was ruled legal
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Re: 51% attack
BitCoin's biggest weakness is that it assumes that any attacks come from a rational actor. The basis of the security is that for any given amount of computing power, you can make more money by mining bitcoin than you can by disrupting the block-chain. This of course assumes your goal is to make money, and not just cause trouble.
The size of the bitcoin network has grown to the point that they pretty much only have to worry about nation-state attacks. But it's still possible.
If JP Morgan, the US Government, et al were smart, they would be putting money into mining bitcoin to increase the stability of the network, and then take advantage of it. Of course no one said they were smart.
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Re: 51% attack
Right now Bitcoin has $5.5 BILLION market cap. That's a lot of power to the people. The US gobment has shown no inclination to "shut down" Bitcoin -- a quixotic quest in any event. They'd rather regulate it and take some of that cash for themselves.
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Re: Regulatory capture?
On the down side, that sounds like the New World Order people might get the chance to smugly say 'told ya so'. On the up side, William Gibson's early stuff can shake off some of its zeerust.
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taxes/fines/fees in bitcoin
Yet New Hampshire has HR552 so bitcoins could be used to pay taxes.
Its hard to demand a shutdown as stated would happen if you can pay taxes with crypto-currency.
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All currencies are virtual
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One of the most interesting things is when you think about what bitcoin actually, physically, literally 'is'
So, step back and think about that for a moment. How can a government make it illegal to store an arbitrary number in an arbitrary database?
People often forget that, for much of the lifetime of bitcoin, it had no value. Literally none. Because, think about it, who would pay a single penny to 'own' an entry in a random database?
It took years before anyone would associate any value of any kind to a bitcoin. The first famous bitcoin transaction of value was when two pizzas were purchased for 10,000 bitcoins. Since two pizzas cost, let's be generous and say, $30, that means the first known recorded real world value of bitcoin was 1/3 of one penny!!
So, what gives bitcoin its value? It is simply that a group of free people choose to 'believe' it does. They could choose to believe pebbles, or shells, or any other token has 'value' and the government would treat it with the same level of hostility. Because what they are actually trying to legislate is *BELIEF*!
The only reason bitcoin is 'worth' anything is because a community has collectively agreed it does.
The thing is, the same is true for all of the worlds fiat paper money as well. If you don't believe me, just ask someone in Zimbabwe or Argentina, or Venezuela.
Bitcoin, in a sense, exposes the fact that the emperor has no clothes. It de-hypnotizes the population from the illusion that fiat (government issued paper money) has some inherent value when, in fact, it does not. It only has value because we have all, collectively, agreed to believe that it does. And, as soon as a population loses faith in the governments paper money, the whole thing collapses like a house of cards. And, as history has shown us, it can happen very rapidly.
Now, while there is no basic difference between why bitcoin has value versus fiat currency; they both have value based on the collective belief or the community which uses it. There is one key distinction. With bitcoin, there is a fixed supply that will never change. Whereas with US dollars there is an infinite supply, measured in literally hundreds of trillions of dollars, which continues to grow non-stop. You know that trillions of dollars in 'debt' that the US holds? That will never get paid back in any other way than simply printing a couple of dozen trillion dollar bill notes.
Because that is all they can do; just keep printing more. And, anyone can see that this cannot continue forever.
So, as a segment of the population chooses to believe that an entry in a double-accounting ledger (distributed database called the blockchain) has more subjective value than government issued fiat currency, there will be a major change and shift in power.
Right now bitcoin is very tiny. So tiny that it is amazing that people like Jamie Diamond or various governments, or the press, gives it so much attention. They give it this attention because they know just how flimsy their house of cards is and how rapidly it can collapse.
So, yeah, let's make having an entry in a database 'illegal'. Let's make it 'illegal' for people to transact value using tokens that were not issued by a government organization. So much for freedom I suppose.
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Easy to shut down
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I think a few folk here interested in economics will know what I mean why I use the word "utopia" to describe the gold standard as the basis of your currency. It may stop state artificial-inflation of the money thus stopping the arguably unjust deprivation of folk's value of the dollar (though maybe just if you consider it taxation..), but it cannot keep up with the fluctuations of outside markets, additional markets, assumes there is enough gold to go around, and all the usual arguments as to why the gold standard is just a libertarian dream, nothing more.
And what is BitCoin if it is not another attempt at a gold standard? The giveaway is in the language when they are talked about as things that can be "mined", things that are naturally scarce, things that are difficult to move around! (Assume your customer has a computer + ISP, and assume that the peer-to-peer technology won't slow right down overtime...) But here's the hard truth: we need fiat money, otherwise we become defenseless against the problems that come from capitalism since there's no way to recirculate the money where it's really needed. Sure it means that you can take value from others just by printing the stuff, but it does mean a democracy has options to try to mend it's economic troubles in a more practical way (e.g. sub-prime mortgage crashes) without being severely lagged by the harder limitations of gold.
If this is an incorrect interpretation I'd like to hear why.
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Re:
We're creatures of patterns. Simple systems appeal to us.
I think BitCoin was an interesting experiment, but I don't really think it will ever become "mainstream". (And I say that as someone who made ~$1000 during the early days.)
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Re: One of the most interesting things is when you think about what bitcoin actually, physically, literally 'is'
Probably easy for governments like that in Germany whose parlimant enacted a law that forbids copying databases someone else compiled, even if they only contain factual information like soccer results.
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Re: One of the most interesting things is when you think about what bitcoin actually, physically, literally 'is'
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The idea might someday prosper, but its name will not be bitcoin.
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Re:
there are a lot of cars that are a lot nicer than fiats, like hyundais; so why not a ford currency, or a tesla currency ? ? ?
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Re: Re: history will repeat
Greenbacks came in two forms: demand notes, which were not originally legal tender but could be used to pay customs duties, and United States notes, which were legal tender and the nation's first fiat currency.
Demand notes stopped being printed in 1862, US notes in 1865.
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Re: history will repeat
All it would take is one corporation that isn't based in the US to invest into bitcoins, and suddenly we'd have a state-actor harming the profits of a foreign sovereign corporation, something TPP prohibits.
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Re:
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Re: One of the most interesting things is when you think about what bitcoin actually, physically, literally 'is'
Money is a portable symbol of wealth, wealth that is often not portable at all -- for example, have you ever tried to pick your house up and carry it with you to a swap meet?
This is as true of gold bullion as it is true of the US Dollar.
Outside of certain industries that use gold as a raw material to create wealth, gold has more value per ounce than tin only because people believe it does.
This is one of the things that killed off the Spanish Empire. They brought so much gold and silver back to Europe that they devalued gold to the point that it became a fiat currency, and inflation soared. It got to the point where people were directly bartering wealth, because gold was all but worthless.
Wealth is those things that make like easier or even possible, from a car (and fuel) to the roof over your head.
A lot of people get into trouble that way in times of crisis -- they invest heavily in gold or silver, rather than actual wealth. So the crisis hits, whatever that crisis may be, and suddenly there are people with lots of worthless metal -- you can't make useful tools out of it, you can't burn it for warmth and you can't eat it -- surrounded by people who have actual wealth but are unwilling to sell any of it for useless pieces of worthless metal.
If you're preparing for a crisis you buy water filters, food, tents, weapons -- real wealth. Spend the fortune you would have spent on metallic fiat currency on useful things instead.
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Re: Easy to shut down
If I hand you one dollar and you hand me four quarter-dollars, does either of us owe a VAT to anyone? No, because no value was added. This would especially apply to speculative transactions -- if you lose money on the exchange, does the government owe YOU a VAT?
Nations buy and sell eachothers currency all the time, mixing taxes into currency exchanges kills that off, and those currency exchanges are one of the ways nations use to prevent their own total economic collapse when the economy suffers a downturn.
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Re:
You can't eat it, it makes a very poor blanket, you can't burn it for warmth, you can't build a house out of it and it only has value if people believe it does.
Real wealth is the things you need to continue living, and the things that make life easier. Tools, houses, food, that sort of thing.
Buying gold as an investment is all well and good so long as money is accepted in place of wealth. But in a crisis, where you're not sure if you have enough food to last until the good times come back, trading some of that food for worthless pieces of metal makes no sense -- the man who has piles of gold but no roof, no food, no warmth in a situation where belief in money breaks down is going to die.
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Re:
Unless the law describes exactly how BitCoin works, outlawing a name just results in a name change.
The problem is that a lot of the mechanisms that make BitCoin work are also mechanisms built into the economies of many nations, including the US itself. Outlawing those mechanisms would kill every bank on the planet.
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Re:
But for some reason we all fall for a delusion that is something very similar. Ask yourself: what else is a system involving failed attempts at artificial scarcity, where you choose who is and who is not allowed to make copies in order to give the "money" value, where not just JPEG is legal tender but ANYTHING with the dollar sign on it is legal tender, yet is collectively, religiously believed by many to be a workable way of protecting property rights?
Start asking more copyright economists this question and see if you can get any good rebuttals.
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Re: history will repeat
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Re: Regulatory capture?
Doesn't this statement describe TPP? TPP circumvents every govt's own laws and regulations.
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Re:
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Re: Re: One of the most interesting things is when you think about what bitcoin actually, physically, literally 'is'
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Re:
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Re: Re: Ezek 7:19 (WEB)
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Global Corporatization needs currency
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Bitcoin can defeat those laws and more. Do you really think the government will allow this to happen without serious changes made to it?
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Re: Global Corporatization needs currency
"Give me control of a nations money supply, and I care not who makes it’s laws".
Which is precisely what happened.
I watch with great interest as systems like Bitcoin undermine this arrogance.
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Re: Re: 51% attack
bitcoin cannot be killed nor regulated,
that is the whole point,
it´s value jumps mostly due to governments imposing barriers on money like CYPRUS, GREECE, CHINA, ARGENTINA, VENEZUELA, etc
if they can regulate it, then they can kill it, don´t they?
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Re: Re: Regulatory capture?
that is literally the real definiton of FACISM
(better explained by the roman symbolism of the fasces)
https://en.wikipedia.org/wiki/Fasces
government + guilds + cops + death penalty= fascia
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Re: Re: 51% attack
print money and buy bitcoins and miners BEFORE the dollar is worthless.
the moment the dollar is worthless due to externals like bitcoin then it will be to late since they cannot use what they print to buy miners
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Any currency could fail.
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Re: Stop bitcoin? Ha!
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Re: One of the most interesting things is when you think about what bitcoin actually, physically, literally 'is'
having no borders at all
this would solve the problem of citizens avoiding taxation by renoucing citizenship...
let's call it the New World Order
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Re: Re: One of the most interesting things is when you think about what bitcoin actually, physically, literally 'is'
WHOT?
you can always arrive driving a Bugatti, wearing a perfectly tailored suit/shoes and a IWC/AP watch... not forgetting the argentinian victoria's secret angel on the right arm.
and a perfectly groomed hair/beard/smile...
or if you are thinking shtf wealth then a small self-sustainable city inside a yatch can always be of help
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Re:
WOW
what a slave mindset:
"but who will do god`s work if not the leisure class??"
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Re:
If this is an incorrect interpretation I'd like to hear why."
not you, no neighbour or no leader of the stupid masses should steal from you to give to his friend's mal-investment.
-picking winners and loosers
-missalocation of resources
-redistributionism
-subsidies
-etc
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Re:
-to move out of the country or
-to escape failing governments like cyprus, greece, argentina, usa, venezuela, China
with your savings,
without being tax-raped or even pre-crime- jailed.
just try that, I dare you,
in such case bitcoin is one of the best options
(if you do not own a huge yatch or a private jet)
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Re: Re:
you can travel everywhere with your lambo, gold, silver, cash, and tons of drugs...
as all your friends do, too.
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Re: history will repeat
How could they "raid" Bitcoin? There isn't a central place where all the bitcoins are is there?
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Re: One of the most interesting things is when you think about what bitcoin actually, physically, literally 'is'
You're kidding, right?
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Re: Re:
Not sure what you mean. Is there an authority that sets the value of US dollars? If so, the value compared to what?
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Re: Regulatory capture?
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