No, you misunderstand.

The bank will have their own bitcoin wallet. When you deposit bitcoin with the bank, you transfer your coins through the normal bitcoin mechanism to the bank's bitcoin address.

The bank won't have an actual vault of bitcoins, their bitcoins will be stored on the distributed secure log like anyone else's bitcoins... but they will hold the private keys to their own wallet.

They will hold an account for you valued in bitcoins, but not actual bitcoins in the bitcoin log.

They will do this if they have to buy bitcoins themselves off of the exchanges... but they will offer incentives to you to store your bitcoins with them rather than in your own wallet, such as interest, security, having your employer pay them rather than you directly... stuff like that.

You can withdraw bitcoins to your own wallet if you want to spend them... they will transfer virtual bitcoins from your bank account, and the corresponding real bitcoins from their private wallet, to your private bitcoin address.

But from their own pool of bitcoins they can make loans that you will pay back in bitcoins with interest using fractional reserve lending methods.

Then the supply of virtual bitcoins can easily exceed the supply of real bitcoins, but their value will be almost exactly equal.

You think just because you can hold bitcoin yourself that there would be no use for banks... well, the same could be said about gold and currency too. You don't have to store your currency in a bank... but most people do... when bitcoin becomes mainstream don't expect the banks to just sit back and ignore it... there's bitcoins to be made for them too, just as they always have done with everything else.

The only difference is the government won't be able to print them new bitcoins if they run out. This was never possible when they held gold either. The technology changes, but the old methods will reamin.

Could you please explain how this is impossible with Bitcoin?

The banks were doing it back in the days of gold. They held a vault full of gold and kept an account of who owned what gold on a ledger. Then they lent out some of that gold, or rather, they lent out notes for gold which they still kept in the vault, in fact, they lent out more gold than they actually had in the vault. This works fine as long as the number of people withdrawing real gold from the vaults doesn't exceed deposits.

There is no reason they can't run a fractional reserve system with bitcoin. Of course the bank's bitcoin holdings will be stored in the bitcoin transaction log, but their customer accounts valued in bitcoins will be stored in an entirely different log altogether, a log held by the bank.

Do you think that bitcoins traded on MtGox are recorded in the bitcoin transaction log too? Then you do not understand either bitcoin or finance. No, the only transactions in the bitcoin log are for deposits or withdrawals too and from MtGox... MtGox tracks your holdings completely separately.

While I think bitcoin is a great idea, not being able to run a fractional reserve lending system based on them is not one of its advantages. Infact, when they go mainstream, I think this is inevitable. The virtual supply of bitcoins (held by depositors in bank accounts) will then be far greater than the actual supply limit of 21M bitcoins recorded in the bitcoin log.

This is no different to the fact that the amount of money sitting in bank accounts now far exceeds the amount of money that exists in actual currency. You've just come to think of them as being the same thing. They are not.

Fiat money can certainly be refused as legal tender, what it cannot be refused for is for the settlement of debts as ordered by the courts.

For example, I can refuse to trade for fiat currency and only accept bitcoin for my services... but if I offered my services on credit, in exchange for bitcoins later, and I did not get my bitcoins, a court could order the debt be paid in fiat currency, and upon offer of that currency I could not then claim that the debt was not paid.

This is the meaning of 'legal tender for debts both private and public'.

To get both then, you need to keep capitalism... but implement a minimum basic wage for everyone... this replaces unemployment benefits and minimum wage.

People will still work to have more... as long as work is actually available.

To stop the complete concentration of wealth, implement a small wealth tax... this replaces income, capital, gift and death taxes... this also stops the inflation of money, by redistributing it from the top to the bottom.

People can still be extremely wealthy, but they must provide economic benefit if they wish to maintain or grow it... it stops the needless hoarding of wealth.

Wealth does not trickle down as much as it torrents up. This keeps the whole system operating efficiently.

You never studied even the lowest levels of economics have you?

Maybe my friends are fools, what does it matter? Its like the guy who gifts the gas he has to run a generator to watch television at his mates house rather than getting it to the grocers, its a socio-political exchange of value rather than monetary exchange. I already said why that's bad, because the value goes to the connected, not those that can use it well.

> You seem to believe only a fool would provide a service at cost.

But you AREN'T willing to provide those services, and you want to IMPRISON anyone who would do so for a profit. At $120, there would be NO SHORTAGE of gasoline, just a shortage of those willing to pay that much --- which is a good thing when it is in short supply. It means timely delivery of gasoline and then the price drops as supply overshoots demand.

Its more like, you see someone choking who has $100, and you imprison the only guy who was willing to help, while you still stand there like some useless turd and feel smug that no one made a profit while the guy dies.

Go FUCKING HELP or admit that your philosophy is broken... cause you AREN'T WILLING TO HELP!!!

You wouldn't drive down there to deliver fuel for $120/gallon? See how that could work?

You can still drive down there and deliver fuel for market prices you hypocritical selfish cunt. That's the whole point... with enough incentives, people would do that, even if they lived FAR FAR AWAY and are normally useless lazy assholes. You are the problem, not the solution.

Dude, this is micro-economics were are talking about... I don't advocate it because its selfish, I advocate it because its outcomes are better than the alternative. It USES greed to deliver VALUE.

Luckily for me, my friends value my life even if I am penniless (high socio-political worth). You see, you can't change the VALUE of anything, only the price!

No, the market hasn't been derailed, the relative VALUE and WORTH of everything has CHANGED due to CIRCUMSTANCE... exactly what the market is designed for.

Capitalism is a mechanism that allocates resources efficiently based on price... those people temporarily increase the price, which increases the INCENTIVES for others to supply, which increases supply, which fixes things quicker and brings the costs back down faster as the situation more rapidly improves.

If they can 'snap up available supplies', it means that they saw that the VALUE of what they bought up was greater than the PRICE they could purchase for, and they can then sell for a profit. Maybe its their last 10 gallons, maybe its just as difficult for them to buy as anyone else.

If someone could buy up EVERY item in the ENTIRE world and hoard it, you might just have a point... but they can't... which means they will have COMPETITION... and CANNOT sell at arbitrarily high prices. The system works, BECAUSE it is self correcting... take away the self correction, you end up with no supply (on the buyer side, and empty wharehouses with capped prices), or sitting on a worthless stockpile of crap (seller side, with competition).

No one is buying up all the gasoline in the world.

Quite honestly, if you aren't down in the streets working purely voluntarily for the good of the community, you are (in your evaluation) an amoral hypocrite who seems to have no ethical obligations whatsoever. You are effectively hoarding your labour, holding out for a better price. Why aren't you supplying these poor bastards with fuel? Instead you want other people with guns to lock up those that are.

Government interference in the market... Trying to cap prices artificially through the threat of force. I am not saying everything would be perfect without government interference, I am saying it is counter productive and the outcomes are actually worse.

No, looting is theft... Market transactions are voluntary agreements between individuals. It might not be pretty, but price signals are what drive markets... High prices mean significantly higher supply, which gets everything moving again quickly, which causes prices to come back down much faster.

Even if they could make a profit at $15, if demand outstrips supply, it won't be long before they run out and can no longer supply... Its called market price, the price the market will bear... To low, no supply, to high, no demand.

The problem you have, is that you think people are forced to pay these high prices simply because someone is offering them, and that simply isn't true. If you can't get it cheaper anywhere else, you go without, but someone who needs it, and is willing to pay that, CAN get hold of it and put it to good use (using it to make more money running their grocery store business for example)... With price caps, all the food goes off as the grocer cannot get the gasoline to run his generator at ANY price because people who don't need it will be the first to buy it at the cheap prices and the seller will run out.

Can I offer my time for labour at $1M/day? I think so... maybe someone else will think so, but probably not and no one will demand my labour at those rates. I can't force them to take my labour... damn would be nice if I could though.

What if I capped your price of labour to $0.01/day with threat of prison if you ask/get more? Would you bother going to work? Suddenly, everyone wants you to work for them (at that rate)... but supply has disappeared.

So, instead, you keep your gasoline, because you can't get what it is WORTH. Its worth changes because, shit, everything is now fucked up... but if you don't let its new worth be reflected in its price, its going to be misallocated. It now goes to my good friend to power his generator so we can watch comedy on television and not the grocer to keep his food cold for hundreds of people. The difference between price and value means we would allocate it based on socio-political value (friends of friends) rather than market value, its still worth the same.

That's a bad thing.

Also, surprised you think its better just to let people go without than have the government supply critical needs in a time of crisis... This seems like a far better solution. Capitalism, underwritten with a strong social safety net. No need for punitive solutions.

Lastly, I am of course, not referring to fraud here... As long as the transactions are honest and voluntary, price should not be anyone's business except buyer/seller.

BTW: I'll sell you a gallon of petrol for $1M... heck, I'll even deliver. Got a problem with that? You might think that's nor 'fair', but just wait till peak oil hits, and that might be a bargain. You can't alter value/worth with government decree, only price...

Wrong... Without government interference, the 'fool' MUST either lower his prices to be competitive with the market, or FORGO otherwise available profits, so he will go bankrupt.

Without government interference the prices will find the point where sale prices == buy prices and maximum goods will be transferred to where the economy can allocated them most efficiently. You know, economics... that's what you're not getting.

With government interference, you end up with no one being able to buy or sell at ANY price. Some people who could have helped are now in prison, and everyone else starves.

You can't legislate prices. You couldn't cap gasoline at $0.10/gallon in a normal situation and expect it to be distributed, neither can you cap it at any price in an emergency... If it was capped the same as anywhere else, well fuck you, I'm selling it where the sky is sunny, the roads aren't blocked and the people aren't dangerously desperate. You might think this is better somehow.

Instead of the government locking people up because they are willing to take a risk and find a price they can personally supply at... Hurting everyone and helping no one. Why wouldn't you have the government come in and simply undercut these people? Have the army come in and sell gas for $0.10/gallon? That would show those fools who bought it at more than $10/gallon. At least now someone would be concerning themselves with supplying gas and not just locking people up.

I guess capitalism is stupid.

Where did that guy get the $10/gallon gas, I'll pay $12/gallon and sell it for $110.

Now I'll be rich and that fool will be bankrupt.

Rinse and Repeat this algorithm...

What happens?

You are wrong. Everything you do affects everyone else. Therefore, this is irrelevant. The only thing that is relevant is if what you do actually harms another person.

Therefore, someone injecting PCP is not your business. Someone eating your eyeballs is your business, but it is completely irrelevant if they are eating your eyeballs because they took PCP, or if they eating your eyeballs because they like the taste. The harm is not in taking the drugs, the harm is in the actions.

OTOH, I think you spend too much time on slashdot, and this affects me greatly. So you should just FUCK OFF ASSHOLE.

Like the Luddites?

Yet more people are addicted to, and die from, alcohol than all those drugs combined.

There's a reason prohibition was tried... there's also a reason it fails.

Except this only works because Alice and Bob are both trading here algorithmically, even if they are only using a very dumb algorithm, its still an algorithm that a HFT can exploit.

If Alice and Bob entered their orders by hand (buy or sell a particular stock at a particular price, with no automatic changing of prices), this can not work. Instead, they are relying on algorithms to try and get them what their algorithm thinks is the best price, then complaining when a better algorithm gets them to move to a worse price.

Do we ban Alice and Bob from using their algorithms to trade? They are the one's funding the high frequency traders by creating a profit motive with their bad trading algorithm. (ie, putting up one price while being willing to trade at a worse price).

I don't understand why a website full of programmers doesn't appreciate algorithmic trading, except that they do not really understand the fundamental operations of markets and scared by all the voodoo.

This could easily be considered a threat of real world violence. Someone should throw that ignorant asshole in jail.