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Comment by zer00eyz | Hacker News Reader

I up-voted this because it is an interesting guide in securing bitcoin.

I think this is stupid in the extreme, and you SHOULD NOT do this ever.

Bitcoin is super interesting as an asset vehicle, but I would not put all my eggs in that basket. For as much as I might not like the Fed and some of the monetary policy it makes, it still gets things done. Right now bitcoin can't seem to change the block size, it needs to, and a squabble could cause serious devaluation of the product as a whole.

There is also the ticking time bomb of the satoshi coins. Right now one individual (or group) controls something like 6% of all the coins available, and on a whim, could cause a major devaluation over night.

All this having been said would I consider buying and holding some bitcoin as very LIQUID asset, and cash equivalent. I sure would. How much would I put into it, no more than a few grand honestly, a sum I am willing to loose.

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>Right now one individual (or group) controls something like 6% of all the coins available, and on a whim, could cause a major devaluation over night.

The Fed does this on an annual basis and actually publicly states when it's going to devalue the currency through QE and rate cuts.

The Fed, like all public institutions, is ultimately answerable to every voter. It's one of the benefits of citizenship, the decision-making power is in our hands.

No, your one vote won't change everything to suit your personal preferences, and if you wanted to change the way some aspect of our system works (like money, or health care, or drug policy, or whatever) it'd be a lot of work, consensus-building, and time. But, at least the power is in our hands, collectively.

Maybe a better way to put some Bitcoin proponents' criticism of the Fed would be that they don't like the monetary policy so far actually produced by politics, and would like to use a kind of money whose monetary policy is produced by something else.

I have never come to a particularly clear or detailed position on monetary policy and so I don't know how good or bad a job of it I think the Fed has been doing from my perspective, nor would I assume that Bitcoin or any altcoin is doing a better job. But it makes some sense to me that someone could say "I wish I could use money that wasn't subject to the Fed, because I so often disagree with the Fed".

I've seen some arguments about this that devolved into elaborate discussions about the institutional status and control of the Fed (as this thread might be in danger of doing...), but I've sometimes seen arguments that went in a different direction, where people suggested that it's important for the Fed to be able to set monetary policy for the money primarily used in the U.S., because monetary policy ought to be subject to political control, because it achieves important political objectives.

I tend to suspect that some form of that is ultimately the issue in play at the bottom of some of these discussions: how subject to politics should or must monetary policy be, and how legitimate or illegitimate is it for people to try to use, on a significant scale, money whose supply and interest rate aren't determined by the central bank of the country they live in?

The Fed is not a public institution. It's a private bank. It's as Federal as Federal Express.

The Fed pays its profits to the US government. The chairman of the Federal Reserve board is appointed by the President and approved by Congress. It has statutory legal authorities. It's a little more federal than Federal Express.

https://en.wikipedia.org/wiki/Federal_Reserve_System

>The Fed pays its profits to the US government.

After paying a dividend to its stockholders (commercial banks).

The dividend to stockholders are less than 10x what they give back to the Federal Government.

What was "given back" was mostly proceeds from maturing Federal bonds. Commercial banks are just first in line to get a special cut, by law.

From https://www.federalreserve.gov/faqs/about_14986.htm,

"Who owns the Federal Reserve?

The Federal Reserve System fulfills its public mission as an independent entity within government. It is not "owned" by anyone and is not a private, profit-making institution."

...and, it goes on from there...

You left out some of the best parts.

>However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, paid to member banks at a maximum rate of 6 percent, determined in part by each member bank's total assets.

The bank is operated "not for profit", but generates $9x billion in "profit" for the Treasury (as claimed multiple times in this thread).

"Ownership" is a moot red herring. Owning a fictional entity is useless; having claims on its cash flows is not. The Federal Reserve System issues stock to commercial banks and pays an annual dividend to them, before any money goes to the Treasury. It is literally all of the upside with none of the downside (e.g. liability). The investment pays for itself in twelve years and then continues to pay in perpetuity.

This trope.

The Fed chair is appointed by the government, and profits are returned to the US Treasury. It's independent insofar as the government doesn't have direct control. But they do have oversight, and could legislate it out of existence tomorrow.

Reposting my comment https://news.ycombinator.com/item?id=11021613 :

Well, Yellen recently said something along the lines of 'being part of the team' and Bernanke claimed something similar in his book or talks iirc ( sorry, no references atm ). The whole independent claim is just smoke and mirrors.

The fed is not a public institution.

But inflation of a currency is a good thing. Hyperinflation and deflation are the things you want to avoid.

Inflation is only necessary when resources and population are inflating. Because money represents current value in the economy, that amount decreases through consumption or increases from new-found resources. Sometimes deflation is necessary to maintain a balanced money.

Where do you draw the line between inflation and hyperinflation?

Do you want to spread panic or temper it?

Well, even if not keeping everything in Bitcoins (which, I agree, sounds dangerous) the same scheme can be used as a convenient cash alternative that - unlike many credit/debit card payments - preserves privacy. I mean, I rarely want merchants to know my full name or email or whatever, however cash isn't always convenient. The transaction fees aren't great, but it's still looks like a fairly nice option.

(Offtopic) And, sorry, I had just fat-fingered a downvote when I meant to upvote!

The last time I had a bitcoin argument I was forcefully reminded that a global public ledger really doesn't preserve privacy. https://news.ycombinator.com/item?id=11589272

Edit: also, systems that are private will get you in trouble with KYC/AML.

True. But, well, I supposed USD-to-BTC and BTC-to-USD services conceal this data to the extent recipient isn't aware of sender's address. This is usually not the case with "classic" services like bank-to-paypal-to-store chain (where PayPal requires you to identify and also would still provide a good insight of your identity to the store).

Also, I think there are coin mixers to avoid this.

OK, but it is actually possible to be extremely private with bitcoin if you want to.

If you use things like bitcoin mixers, or pay/sell bitcoin for cash, it can be extremely difficult for people to track you in a mass collection scenario.

People get away with buying drugs on the internet, or blackmailing people with ransomware all the time and most of them don't get caught.

Sure, if the government is sending black vans to your house to spy on everything you do, you are probably screwed no matter what you do.

But most situations aren't like that. And bitcoin fits the bill for being pretty darn anonymous if you actually go about it right.

But DASH does, and Bitcoin could to if they got their act together.

> All this having been said would I consider buying and holding some bitcoin as very LIQUID asset, and cash equivalent.

But how liquid Bitcoin really is?

Suppose you have 1 BTC on your phone. Can you instantly turn it into cash (and vice-versa)? Does that depend on a single Bitcoin exchange, which can stop working suddenly leaving you stranded? Does it have to go through your bank account or your credit card account?

This is probably not an issue if you live in a place with a high enough amount of Bitcoin users, since many of them could be willing to exchange Bitcoins and cash with you. But otherwise, it's a relevant question to ask.

Is it as liquid as cash in hand, no.

Is it more liquid than the stocks I own, yes, and those are the most liquid of my investments (vs bonds, 401k etc).

I live in CA so I have a rather large chunk of cash on hand. It isn't outrageous amount, but I could make it for two weeks if there was an earthquake or natural disaster. I don't think the bitcoin would do me any good if that happened.

Agreed. When you are one step removed from your base currency, it could get inflated or deflated. Bitcoin still subject to Price volatility.

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