Unlimited Debt "Grebt"

We've all seen the new's, it's pretty undeniable that the economy and the world are out of control, but how do we understand it? Its been happening for decades. People say the same thing about climate change and I think the situations are similar in that it's spiraling out of control. Its a tragedy of the commons, debt is at its core and its rooted in a lack of government transparency. Sounds like the same old story, but these are all things crypto currency is designed to avoid.

With stock prices tumbling our governments considering jumping in to prop them up. This will create even more debt. Where do we stop? It's not like we are getting the money from countries or people that have spare. Every country is now in debt as well as most people. Its never been as global as this. Mars isn't going to give us a loan. Countries can compete with each other and argue about who's allowed the most debt and who's not, but the only back bone is public opinion.

The truth is there is no agreed upper limit to how much debt can be created. This is how debt is becoming unlimited.

So called wealthy countries actually have tend to have more debt than poor countries, even on a per capita basis. Japan is at 240% and the majority of countries are carrying debt. Chile is the only major country that is in significant positive territory. green is a little deceptive on this chart as countries with debt are still shown green, also notice that countries that have actually defaulted are now shown in green eg Russia and Argentina.

Government debt as percentage of GDP globally (September 2012)

Time magazine is now describing a complex "government quality" perception as an indicator. Based on this we tell poorer countries they need to rain in their debt or risk being down graded by the bad name gang, moodies or the poor standard or bitch. This is what we are saying to Greece right now, notice that they are dark red.

Whats stops countries from getting more debt is interest rates. Greece now have to pay 11% for its money where Japan and the USA pay next to nothing. I know i would take out that 0% loan, but paying rates like 11% it really hurts. You have to make smart choices for it to be worthwhile but when you're paying 0% like in japan and the EU, debt becomes irrelevant and unlimited.

You can just go get a plane, pop the ejector seat and watch it crash whilst smoking a cigar in your golden parachute.

Its totally unfair at the moment. The developed world pretend to be the hero "Whenever there's a problem we can just patch it with debt" No big deal for us, its free anyway. Based on the false assumption of our reputation for creditworthiness. The psychology of it is simple.

Why should Americans and Japanese people have to suffer to pay back their debts when the Russians and Argentinians have defaulted on theirs and are doing ok now?

The problem is we know these debt patches don't help us in the long term. At some stage you get worthless money. Over the last 50 years when the world left the gold standard, we have become reliant on dept to boost the economy it has worked but we are finding less and less real gains. Debt eventually stops working, like a drug. At any moment, perceptions can change. Reputation is transient and comparative.

When rates go to zero its very easy to for countries to get leveraged out of control. Credit worthiness is now comparative. We are talking about who is the least bad credit. We are looking now at accepting more debt in developed countries in order to support the stock market after the latest crash. At some point everyone will have what's perceived as to much debt and the lights come on. People will no longer accept it at all as payment.

Bitcoin is not based on debt creation or deception. This is why people are backing crypto currencies in general in the long term. this is seen in the markets during volatile times in the market. If bitcoin is perceived as a safer haven than bonds then government debt rates go up.

This week the EU approved Greece's €86-billion bailout program. Greece having already missed payments dates on payments to the IMF and other creditors was saved by the bell. Curiously however Greece credit rating has gone up.

That's like giving someone who can't pay their debt with out a job in site, a new loan for a third time and then upgrading their credit. It's nice but it doesn't happen in this world.

Below is a chart showing the definitions of credit ratings from agencies in the band relevant to Greece.

		B+	An obligor is MORE VULNERABLE than the obligors rated 'BB', but the obligor currently has the capacity to meet its financial commitments. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitments.
		B
		B−
		CCC	An obligor is CURRENTLY VULNERABLE, and is dependent upon favourable business, financial, and economic conditions to meet its financial commitments.
		CC	An obligor is CURRENTLY HIGHLY-VULNERABLE.
		C	The obligor is CURRENTLY HIGHLY-VULNERABLE to nonpayment. May be used where a bankruptcy petition has been filed.
		D	An obligor has failed to pay one or more of its financial obligations (rated or unrated) when it became due.

 
Greece was upgraded from CC to CCC. However the country has actually missed payment dates. Isn't that D? The workings of the rating agencies are mysterious. It's not working like the ratings we get when we forget to pay our credit card bills.

Reserve requirements when lending to countries with rating AA- and above are 0%. This means developed countries can get as much money as they like as debt can be created for them with 0% reserves. The only thing holding that back is interest rates, now we talked about how these where also zero. this is where the you really start to see how unlimited it is.

I'll create as much debt as you like, with 0% reserves backing it up, give it to you and charge no interest for it, just as long as you do the same for me.

Greece in a way is catching onto this concept. given dept is unlimited and they are part of the most powerful AAA rated EU , why would they hold back on spending? The austerity is meaningless, however at some stage the current unlimited dept system will dissolve itself as more and more people realise what it is and take advantage of it.

With dept continuing to grow above 2008 crash levels, we need to rethink our method of tackling the issue. I'm not asking people to buy bitcoin or litecoin. I'm just asking people to think about what fiat is and what debt has become. The debt concept however though it seems complicated is much more simple when you take a step back. Just call it "Grebt".

 

Government grebt as percentage of GDP globally (September 2012)

Retro Paper Wallets

Why XT Should Start Their Own Party

A vocal online debate has been raging. Echoing through the endless chambers of the internet. All this at a time when the majority of the world have not even got their heads around the concept of a how a simple crypto currency works. There are even publications as mainstream as Bloomberg discussing it. In the past I have taken a wait and see approach as I also believe the majority of bitcoin users have. But now I think XT activists are out of control, more out of control than me, especially on Reddit, and we have to say something.

Its for simple moral reasons that I think they should start their own party. They tried to start a fight.

Inspiring hard forking is risky for any crypto currency. The mining process is continually cutting down forks and creating consensus for a reason. Hard forks especially corrupt the ledger across time and this is the primary function of bitcoin this should be avoid. Some miners end up mining for free, transactions bounce and there are possibilities of double spends. Accurate ledgers are what we want and they are the most fair, it as simple as that.

Bitcoin in its current form is a programming miracle and perfectly functional in its current state. This is respectable and should be revered in a way for its stability. Many companies have been set up under the current framework and have tailored their services around the blocksize. It could be a pressure cooker for innovation and adoption. Any major change to the most successful crypto currency should be a last resort option. 

Decentralisation! yes I hear you! We should not censor ideas and everyone should be free. These are themes that are important and part of the fabric of crypto currency mechanism, but people need to be realistic when talking about areas within the code. It's hard to keep a program working based on chaotically competing core applications. I think purist's need to be reasonable.

Chaotic competition should happen between crypto currencies, but within them there needs to be some harmony. Altcoins are available to make money transfers with. They are fully functional and some well established in their own right. Many of them have aspects that are too far out for people starting, but will surely lead to some coin that will one day surpass the bitcoin in users. Can a few bitcoin XT enthusiast really predict the future? It's a complex environment involving many features, including humans and nobody really knows what could be happening in the world ten years from now and when transaction fees become bitcoin miners main reward. 

All this said, there is nothing stopping XT fans from creating their own altcoin from genesis and starting their own party.  

"If they don't like the bitcoin koolade then go make your own, the stuffs open source! you don't need to spike ours!"

This is the crux of the moral issue. Early adopters to a genesis block XT currency, one not using the bitcoin blockchain, would receive huge mining rewards. If this would be successful it would be a huge financial benefit to them. However XT fans don't want to do this. They know that the small modification to bitcoin would not grab widespread appeal. If they believe in it so much then you'd think that they'd be willing to start fresh.

In short XT fans want keep Bitcoins users and infrastructure and twist to their own view. But who are we to know whats right? Litecoin already offers and equivalent to a 4mb block, and there is much more transaction volume available on dash, doge and peer coins than there would be on an XT network. The amount of marketing and reputation and commerce building required for a cypto currency can be huge. Its took years for bitcoin to get off the ground and many altcoins struggle for attention. So XT comes along and says "hey bitcoin your so cool, this is a nice party, I totaly want to be just like you, you just need a little XT". Everyone else is like "ahh we've been refining this recipe for years and its going great, here's the ingredients if you like try making your own" then XT starts a cyber scream.

Bitcoin users are well aware of what Bitcoin is and what it can do at the moment. That's why they are there. It's strength is in peoples belief in its current form, functionality and reputation. People who think another crypto currency is better can easily change their bitcoin for it. Exchanges doing this are much easier than those using fiat. So XT can set up a party on the other side of the street and we can all play together, drink each others koolaid, have a block party so to speak. Combine and make one big party if we like, Change is good but it should be inspired. Violence won't work on a decentralised system. Within the currency progress will only come with consensus.

All the arguing and posturing kills the vibe and is a waste. People should be getting active and getting their friends on board with bitcoin in general. Priorities get twisted and the detail is amazing, but trying to mess with the core at the moment is unnecessary. Helping people understand the simplicity of bitcoin is the key.