[Cryptography] Fun and games with international transaction settlement (was Re: IBM looking at adopting bitcoin technology for major currencies)

John Levine johnl at iecc.com
Sun Mar 15 22:24:10 EDT 2015

>> sovereign debt, with savings essentially nonexistent.  This means that the
>> assets aren't capital but fixed (and some intangible) ones, and what will the
>> PRC do with Mt.Rushmore and Golden Gate Bridge?

This is getting a long way from crypto but I hope our list owner will
permit one last discursion.

Government debt is different from personal or corporate debt for
several fundamental reasons.  Nation states are immortal and can levy
taxes, so government debt is really a claim on future tax revenue.
Other than the rare situation where the government is so bad at
collecting taxes that it can't collect enough to service its debt (a
problem that Greece may or may not have), it can pay its debts.

Another fundamental difference is that government debt certainly in
large countries, is mostly held by its own residents.  Even though
China and Japan each have over $1 trillion of US debt, still something
like 90% of US government debt is held domestically.  This means that
for the most part, we owe the debt to ourselves.  I have a chunk of it
in my retirement account, for example.  So the debt is really an issue
of redistribution, not of affordability.  

The administration of US government debt is quite efficient, with
vanishingly small trade commissions on reasonably large amounts and
zero commission if you use Treasury Direct to buy directly, so I don't
see where something like bitcoin would make a difference.

Bitcoin transactions are currently quite cheap, which now helps to
push down costs in other payment systems, particularly ones like
credit card clearing that aren't very competitive.  But there's no
reason to expect bitcoin to stay cheap forever -- as the mining reward
drops, the transaction fees are going to have to increase.  If the
miners are combined into a handful of small pools, there's no reason
they'd compete on price any harder than Visa, Master Card, and Amex


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