I like Avery but I thought his critique was an ill-thought-out mess.
1) I’m not informed enough to judge whether the gold standard is a fundamentally good idea or not, but I can see that Avery is even less informed than me. Some of his (bolded!) statements like “Gold is a stupid inconvenient currency that’s worse than paper” are basically nonsensical; that has nothing to do with the economic argument for a gold standard. Much of the rest seems to be non sequiturs, bringing up only briefly (and then dismissing mockingly) any real reasoning for a gold standard. Anyway, if we really wanted to, we could add inflation to Bitcoin too.
2) I think that governments will try to squash it, but I’m not sure if they can succeed. Bitcoin exchanges are starting to proliferate in multiple countries around the world, and the USG can only do so much to stop people from using them. In the future, I think it could continue to thrive even if the USG tried to seize American Bitcoin-related assets and prevent Americans from transferring money directly to Bitcoin exchanges. There are just too many ways around those laws—c.f. online poker legislation. I think this is the most powerful point Avery makes, though. If the USG acted now to attack Bitcoin users, I could envision people drastically losing confidence in the currency and a resultant death, but the government is slow to act.
3) I share Avery’s fundamental skepticism but Bitcoin is really pretty simple; it’s pretty hard to imagine a mystery vulnerability in it short of busting SHA-256. I agree that it’s a little bit unnerving to imagine our entire financial system sitting on something like Bitcoin, but I’m not sure whether it’s rational to reject it based on that. If Bitcoin’s benefits really are significant, I think we could probably do further work to prove its security. Avery should actually take half an hour and figure Bitcoin out before he makes such a critique.
4) Somehow he managed not to even point out why it’s important for a currency to work offline. Credit cards don’t usually work offline, and we use those often enough. What’s the big deal? If this turned out to be really important, one could imagine middlemen with reserves of Bitcoin issuing physical currency, similar to how a currency backed by the gold standard would issue physical currency that represents quantities of gold—as much or as little physical currency as we care about.
(edit: in the spirit of jim’s disclaimer above, I also own a very small handful of bitcoins, so I may be biased.)
I’m not informed enough to judge whether the gold standard is a fundamentally good idea or not
Here’s Krugman’s tale of the babysitting co-op, a nice illustration of how and why manipulation of the money supply is useful. A gold standard prevents such manipulation, short of changing the gold exchange rate, digging up gold, or locking it away in a fortress.
That is basically the pro-gold standard/anti-Keynesian response to Krugman’s argument, and I’m impressed (albeit saddened) that you could come up with the major, current counterargument so quickly.
I think you understand the story perfectly, and now sympathize with one half of the economics community on the issue of monetary equilibrium.
Incidentally, what would be the market price for co-op credits if people knew in advance that the co-op could arbitrarily decide to flood the market with (face value 1⁄2 hour) credits? Or of US dollars if people knew in advance that the government could decide, at its whim, to redeem the dollars for less than 1⁄20 ounce of gold?
There’s a disturbing tendency of all the anti-gold standard arguments to assume away the harms of horribly defaulting on a promise made in the generation of a currency. It’s just like arguing that a business venture could increase its profitability if it could just repudiate all its loans without penalty. True, but irrelevant.
Why saddened? … I admit i don’t know economics at all :-(
Because of what it says about economics—that an outsider can reach the same conclusion, for the same reason, as (half of) the “experts”. Remember the “layshadow test”? If an academic field is such that a layperson can come in, spend a few hours, and produce output indistinguishable from people who have spent years “learning” the field, then that field is lost because the inferential distance is low, implying little knowledge accumulation.
That’s what seems to be going on here.
And what is the other side’s standard response to my (apparently well-known) question?
I just found out there’s a Wikipedia article about the debate. It doesn’t give the response to that critique, but as far as I know, the response is that it requires flexible prices throughout the economy and won’t work if prices are “sticky”.
Correction: Here’s another critique from there:
Mitchell criticizes this because, he asserts, the falling wages of babysitters only solves the problem if it reduces the desire of couples to save, which is not supported by any research.[9] The only effect of falling wages would be to increase the real value of nominal contracts. In other words, couples would have to spend more time babysitting before they acquired the amount necessary to leave the cooperative. Mitchell concludes that the problem is greater aggregate desire to save than can be funded by existing administrative debt, and that the solution is thus either to reduce (desire for) savings or, more likely increase spending by simply issuing more scrip.
Because of what it says about economics—that an outsider can reach the same conclusion, for the same reason, as (half of) the “experts”. Remember the “layshadow test”? If an academic field is such that a layperson can come in, spend a few hours, and produce output indistinguishable from people who have spent years “learning” the field, then that field is lost because the inferential distance is low, implying little knowledge accumulation.
I’m not sure that’s always true. For example, in my field, mathematics, there are a lot of results that are much easier to explain and learn then they were to discover.
I’m not sure that’s always true. For example, in my field, mathematics, there are a lot of results that are much easier to explain and learn then they were to discover.
With any NP problem, it’s much easier to verify the result than to come up with it. What you describe probably fits this pattern.
In economics, the problem is not that established results, or even open problems, are easy to explain. The problem is that credentialed experts keep arguing about toy problems that are easily explained to a layman, and are unable to produce any insight beyond what an intelligent layman would also be able to figure out quickly. What’s more, they can’t even reach consensus that the problem is intractable, each arrogantly claiming that his ideologically favored theory is correct, and his opponents disagree because they are delusional or dishonest charlatans. (The latter is usually expressed more diplomatically, though it’s actually quite common even for top-rank economists’ writing to drip with unconcealed scorn and contempt of the most arrogant sort.)
I haven’t finished a GED in Economics, but I would assume nobody would want to start doing that because, if you’re the only one doing it, you will perform twice as much babysitting as you get.
The analog in the real market would be downwards-sticky wages (that is, workers are very resistant to cuts in pay, even more so than layoffs; that’s why employers are more reluctant to cut wages of existing employees than to just get rid of them).
That’s not the analog; the analog would be the externality effect. An individual lowering (excessively high) prices imposes a loss on themselves but creates a positive externality on all other individuals; since the externality is never internalized, price adjustment is underprovided. If price adjustment is costly, the problem is even worse.
Wages are not thought to be sticky for this reason (real wages are not as obviously anticyclical as the argument would imply.).
A follow-up: I think the main sign of poor economics discourse in Krugman’s article is that he didn’t even think it necessary to pre-empt your obvious counterpoint, thereby making his argument woefully incomplete. It would have been a lot more productive if he had added, “It wouldn’t do any good to sell babysitting services below the coupon face value, because ____. This corresponds to ____ in the broader economy, which is bad because …”
Would there be any economic difference between (1) the couples all deciding to babysit for half a coupon and (2) doubling the number of coupons each couple has? The two choices seem functionally equivalent to me but I might be missing something.
even if the US tried to seize American Bitcoin-related assets and prevent Americans from transferring money directly to Bitcoin exchanges . . . [T]here are just too many ways around those laws—c.f. online poker legislation.
Online poker is not a fundamental threat to the government’s ability to collect taxes like Bitcoin is. Also, online poker as far as I know is not a generally useful tool in the commission of crimes and acts of terrorism.
Online poker is not a fundamental threat to the government’s ability to collect taxes like Bitcoin is.
Anecdotally—I’ve seen multiple British people (including geeks at Dorkbots, who I would have thought more open to libertarianism without necessarily conflating it with conservatism—admittedly, the two correlate pretty closely in the UK) utterly outraged at the prospect of various schemes for alternate currencies, open currencies, etc. Their objection? They see the possibility this stuff can’t be taxed, and get outraged at the idea, because they have a keen appreciation of just what taxes buy.
I haven’t seen Australians get anywhere near as outraged at such ideas as the British do, for example. Many British people seem to consider taxability a strong feature of a financial system. I predict they won’t like Bitcoin at all and so it won’t gain traction in the UK unless the government pushes it heavily, which isn’t going to happen.
Bitcoin doesn’t do anything to prevent taxation of real estate or otherwise conspicuous property (which, incidentally, I find to be superior forms of taxation anyway). The government says, “this land is worth X GBP, pay y% of that or be evicted”. It doesn’t need to follow trillions of transactions to get that to work. It only has to follow transactions related to transfers of such conspicuous items, which (unlike with other valuables) it has significant control over due to people’s need for government to recognize that ownership.
For example, if a gold coin is stolen from you, “good luck getting it back”, but if a horde somehow decided to “steal” your house, the government doesn’t have any problem eviicting them and giving it back to you. Since people want the government’s title registries to recognize their ownership of a house, I suspect they would play along and disclose purchase price in home sales. (And this is all assuming the government will bother to get property valuations correct in the first place...)
taxation of real estate or otherwise conspicuous property (which, incidentally, I find to be superior forms of taxation anyway)
What are the examples you’re thinking of of countries who get the major, or even a substantial, proportion of general revenue from land taxes rather than income and/or sales tax?
It’s a state, not a country, obviously- but until recently New Hampshire had not sale or income tax. The government was funded almost exclusively by real estate taxes and government run liquor stores.
None, but it becomes a bigger fraction as transactions become easier to hide. This phenomenon is mentioned in an article by Paul Birch and my nemesis. (Edit: actually, that article doubles as a warning of how governments are likely to respond to the difficulty of monitoring transactions, and it’s neither pleasant, nor the kind that brings about revolutionary change.)
The reasons I had for deeming it superior are that:
It’s more transparent and hard to privately evade.
It doesn’t require extensive monitoring of all the transactions in the economy.
It doesn’t punish people for engaging in Pareto-optimal transactions (working for someone, buying something, etc.)
That’s one thing that (i think) most economists do agree on: the first best tax scheme is a land tax scheme—on the value of the land, not the value added (by building houses, apartment buildings, or skyscrapers).
This is politically infeasible and measuring the value added is difficult, so the second best most economists push for (i think) is a sales tax which at least doesn’t discourage productive behavior.
The income tax, on the other hand, is just a terrible idea.
Many economists do support the land tax, but think it is too low to support government functions. I think a better criteria is—restrict the government only to the extent that you can support with a land tax, since a land tax is basically the approrpriation of a positive externality(civilization all around you)
When the tax approaches the rent of the property, the capitalised land value drops to zero. If the land tax is based on percentages, you’ll have the rate escalating way beyond 100%. No problem for homo economicus, but most real world people would be shocked by seeing property tax rates of 100000%.
I’m not sure I agree. Firstly, I bet that people have laundered plenty of money using online poker, and failed to report taxes on a lot of it, too. (Although obviously there’s a difference in scale between a proposed new replacement currency and poker players’ chips, and Bitcoin’s anonymity makes it much easier.)
Secondly, what makes it much easier to evade taxes by failing to report Bitcoin payments than evade taxes by failing to report cash or check payments? Taxes work because enough companies and individuals pay them voluntarily that the cheaters can be cross-checked into oblivion. I don’t see why people would be more likely to cheat if they were transacting in Bitcoin instead of cash.
Consider also the USG’s attempts to enforce IP laws. Lots of sound and fury, but totally ineffective so far in actually curbing copyright infringement by individuals. And you know a lot of lobbyist money must be going towards trying to get those laws working. If people ever care about using Bitcoin as much as they care about downloading an album quickly and easily, then it seems to me that government is in trouble.
Taxes work because enough companies and individuals pay them voluntarily that the cheaters can be cross-checked into oblivion.
Taxes work because people like me—highly-paid middle-class employees—find them almost impossible to dodge. Everyone else is the fluff on the side—it’s PAYE (pay-as-you-earn, where taxes are withheld from your earnings) employees who are the backbone of government revenue. And, increasingly, sales taxes. In both cases, the pressure point is businesses, of which there are far fewer than there are citizens.
Secondly, what makes it much easier to evade taxes by failing to report Bitcoin payments than evade taxes by failing to report cash or check payments?
Really? OK, I will assume you’re serious and not joking. A check is drawn on a bank or savings and loan or such, and banks, etc, are heavily regulated and audited by government.
As for cash, the U.S. government makes it inconvenient to pay someone or be paid by someone in cash with “Know Your Customer” banking regulations. They try to make it so that the inconvenience and risk increases at least linearly with the amount of cash involved.
Copyright infringement and gambling do not have the potential to seriously reduce governmental revenue. Consequently, the most competent bureaucrats have not been assigned to controlling those things like they have or will be assigned to controlling Bitcoin.
The U.S. response to infringement has been conducted mostly by the legislature and the judical branch. It would be a lot more effective if the most competent parts of the executive branch, e.g., the Secret Service and the Treasury Department, made it a priority.
Disclaimer: I haven’t studied Bitcoin so these comments should be taken as my rationale for not making the effort to study it.
I was serious, but on reflection, I agree—it’s easy to audit checks, since they go through a bank. You may be right about how large a threat to taxation a strong Bitcoin would be.
They try to make it so that the inconvenience and risk increases at least linearly with the amount of cash involved.
Linearly? You don’t have to go up all that far on a linear scale before you reach 100% chance that you will be caught and receive the maximum punishment allowed by law!
I agree you cannot make risk linear with dollars. What I tried to say is that they try to make inconvenience linear with dollars, so that one shouldn’t generalize from the fact that one can take a few 1000 out of the bank in cash and put it in again a few months later without anything happening.
Well, even that’s not right, but I do not have time to be more articulate right now.
Secondly, what makes it much easier to evade taxes by failing to report Bitcoin payments than evade taxes by failing to report cash or check payments? Taxes work because enough companies and individuals pay them voluntarily that the cheaters can be cross-checked into oblivion. I don’t see why people would be more likely to cheat if they were transacting in Bitcoin instead of cash.
Cash is pretty anonymous, but also pretty useless for paying people over the internet. Cheques typically leave an audit-friendly paper trail.
I like Avery but I thought his critique was an ill-thought-out mess.
1) I’m not informed enough to judge whether the gold standard is a fundamentally good idea or not, but I can see that Avery is even less informed than me. Some of his (bolded!) statements like “Gold is a stupid inconvenient currency that’s worse than paper” are basically nonsensical; that has nothing to do with the economic argument for a gold standard. Much of the rest seems to be non sequiturs, bringing up only briefly (and then dismissing mockingly) any real reasoning for a gold standard. Anyway, if we really wanted to, we could add inflation to Bitcoin too.
2) I think that governments will try to squash it, but I’m not sure if they can succeed. Bitcoin exchanges are starting to proliferate in multiple countries around the world, and the USG can only do so much to stop people from using them. In the future, I think it could continue to thrive even if the USG tried to seize American Bitcoin-related assets and prevent Americans from transferring money directly to Bitcoin exchanges. There are just too many ways around those laws—c.f. online poker legislation. I think this is the most powerful point Avery makes, though. If the USG acted now to attack Bitcoin users, I could envision people drastically losing confidence in the currency and a resultant death, but the government is slow to act.
3) I share Avery’s fundamental skepticism but Bitcoin is really pretty simple; it’s pretty hard to imagine a mystery vulnerability in it short of busting SHA-256. I agree that it’s a little bit unnerving to imagine our entire financial system sitting on something like Bitcoin, but I’m not sure whether it’s rational to reject it based on that. If Bitcoin’s benefits really are significant, I think we could probably do further work to prove its security. Avery should actually take half an hour and figure Bitcoin out before he makes such a critique.
4) Somehow he managed not to even point out why it’s important for a currency to work offline. Credit cards don’t usually work offline, and we use those often enough. What’s the big deal? If this turned out to be really important, one could imagine middlemen with reserves of Bitcoin issuing physical currency, similar to how a currency backed by the gold standard would issue physical currency that represents quantities of gold—as much or as little physical currency as we care about.
(edit: in the spirit of jim’s disclaimer above, I also own a very small handful of bitcoins, so I may be biased.)
Here’s Krugman’s tale of the babysitting co-op, a nice illustration of how and why manipulation of the money supply is useful. A gold standard prevents such manipulation, short of changing the gold exchange rate, digging up gold, or locking it away in a fortress.
Now you’re informed.
I don’t completely understand that story. Why didn’t they start babysitting for half a coupon?
That is basically the pro-gold standard/anti-Keynesian response to Krugman’s argument, and I’m impressed (albeit saddened) that you could come up with the major, current counterargument so quickly.
I think you understand the story perfectly, and now sympathize with one half of the economics community on the issue of monetary equilibrium.
Incidentally, what would be the market price for co-op credits if people knew in advance that the co-op could arbitrarily decide to flood the market with (face value 1⁄2 hour) credits? Or of US dollars if people knew in advance that the government could decide, at its whim, to redeem the dollars for less than 1⁄20 ounce of gold?
There’s a disturbing tendency of all the anti-gold standard arguments to assume away the harms of horribly defaulting on a promise made in the generation of a currency. It’s just like arguing that a business venture could increase its profitability if it could just repudiate all its loans without penalty. True, but irrelevant.
Why saddened? And what is the other side’s standard response to my (apparently well-known) question? I admit I don’t know economics at all :-(
Because of what it says about economics—that an outsider can reach the same conclusion, for the same reason, as (half of) the “experts”. Remember the “layshadow test”? If an academic field is such that a layperson can come in, spend a few hours, and produce output indistinguishable from people who have spent years “learning” the field, then that field is lost because the inferential distance is low, implying little knowledge accumulation.
That’s what seems to be going on here.
I just found out there’s a Wikipedia article about the debate. It doesn’t give the response to that critique, but as far as I know, the response is that it requires flexible prices throughout the economy and won’t work if prices are “sticky”.
Correction: Here’s another critique from there:
I’m not sure that’s always true. For example, in my field, mathematics, there are a lot of results that are much easier to explain and learn then they were to discover.
With any NP problem, it’s much easier to verify the result than to come up with it. What you describe probably fits this pattern.
In economics, the problem is not that established results, or even open problems, are easy to explain. The problem is that credentialed experts keep arguing about toy problems that are easily explained to a layman, and are unable to produce any insight beyond what an intelligent layman would also be able to figure out quickly. What’s more, they can’t even reach consensus that the problem is intractable, each arrogantly claiming that his ideologically favored theory is correct, and his opponents disagree because they are delusional or dishonest charlatans. (The latter is usually expressed more diplomatically, though it’s actually quite common even for top-rank economists’ writing to drip with unconcealed scorn and contempt of the most arrogant sort.)
I also wonder how come they didn’t start trading coupons for cash. (Or maybe they did but won’t tell?)
I haven’t finished a GED in Economics, but I would assume nobody would want to start doing that because, if you’re the only one doing it, you will perform twice as much babysitting as you get.
The analog in the real market would be downwards-sticky wages (that is, workers are very resistant to cuts in pay, even more so than layoffs; that’s why employers are more reluctant to cut wages of existing employees than to just get rid of them).
That’s not the analog; the analog would be the externality effect. An individual lowering (excessively high) prices imposes a loss on themselves but creates a positive externality on all other individuals; since the externality is never internalized, price adjustment is underprovided. If price adjustment is costly, the problem is even worse.
Wages are not thought to be sticky for this reason (real wages are not as obviously anticyclical as the argument would imply.).
A follow-up: I think the main sign of poor economics discourse in Krugman’s article is that he didn’t even think it necessary to pre-empt your obvious counterpoint, thereby making his argument woefully incomplete. It would have been a lot more productive if he had added, “It wouldn’t do any good to sell babysitting services below the coupon face value, because ____. This corresponds to ____ in the broader economy, which is bad because …”
Also, I agree with Vladimir M.
Would there be any economic difference between (1) the couples all deciding to babysit for half a coupon and (2) doubling the number of coupons each couple has? The two choices seem functionally equivalent to me but I might be missing something.
Online poker is not a fundamental threat to the government’s ability to collect taxes like Bitcoin is. Also, online poker as far as I know is not a generally useful tool in the commission of crimes and acts of terrorism.
Anecdotally—I’ve seen multiple British people (including geeks at Dorkbots, who I would have thought more open to libertarianism without necessarily conflating it with conservatism—admittedly, the two correlate pretty closely in the UK) utterly outraged at the prospect of various schemes for alternate currencies, open currencies, etc. Their objection? They see the possibility this stuff can’t be taxed, and get outraged at the idea, because they have a keen appreciation of just what taxes buy.
I haven’t seen Australians get anywhere near as outraged at such ideas as the British do, for example. Many British people seem to consider taxability a strong feature of a financial system. I predict they won’t like Bitcoin at all and so it won’t gain traction in the UK unless the government pushes it heavily, which isn’t going to happen.
Bitcoin doesn’t do anything to prevent taxation of real estate or otherwise conspicuous property (which, incidentally, I find to be superior forms of taxation anyway). The government says, “this land is worth X GBP, pay y% of that or be evicted”. It doesn’t need to follow trillions of transactions to get that to work. It only has to follow transactions related to transfers of such conspicuous items, which (unlike with other valuables) it has significant control over due to people’s need for government to recognize that ownership.
For example, if a gold coin is stolen from you, “good luck getting it back”, but if a horde somehow decided to “steal” your house, the government doesn’t have any problem eviicting them and giving it back to you. Since people want the government’s title registries to recognize their ownership of a house, I suspect they would play along and disclose purchase price in home sales. (And this is all assuming the government will bother to get property valuations correct in the first place...)
What are the examples you’re thinking of of countries who get the major, or even a substantial, proportion of general revenue from land taxes rather than income and/or sales tax?
It’s a state, not a country, obviously- but until recently New Hampshire had not sale or income tax. The government was funded almost exclusively by real estate taxes and government run liquor stores.
None, but it becomes a bigger fraction as transactions become easier to hide. This phenomenon is mentioned in an article by Paul Birch and my nemesis. (Edit: actually, that article doubles as a warning of how governments are likely to respond to the difficulty of monitoring transactions, and it’s neither pleasant, nor the kind that brings about revolutionary change.)
The reasons I had for deeming it superior are that:
It’s more transparent and hard to privately evade.
It doesn’t require extensive monitoring of all the transactions in the economy.
It doesn’t punish people for engaging in Pareto-optimal transactions (working for someone, buying something, etc.)
That’s one thing that (i think) most economists do agree on: the first best tax scheme is a land tax scheme—on the value of the land, not the value added (by building houses, apartment buildings, or skyscrapers).
This is politically infeasible and measuring the value added is difficult, so the second best most economists push for (i think) is a sales tax which at least doesn’t discourage productive behavior.
The income tax, on the other hand, is just a terrible idea.
Is this your statement or that of economists? (I ask because the rest of your post is about what economists say.)
Both, though like the other statements about what most economists think, I’ll note that I’m not super-certain.
Many economists do support the land tax, but think it is too low to support government functions. I think a better criteria is—restrict the government only to the extent that you can support with a land tax, since a land tax is basically the approrpriation of a positive externality(civilization all around you)
Why can’t the rate just be set higher?
When the tax approaches the rent of the property, the capitalised land value drops to zero. If the land tax is based on percentages, you’ll have the rate escalating way beyond 100%. No problem for homo economicus, but most real world people would be shocked by seeing property tax rates of 100000%.
I’m not sure I agree. Firstly, I bet that people have laundered plenty of money using online poker, and failed to report taxes on a lot of it, too. (Although obviously there’s a difference in scale between a proposed new replacement currency and poker players’ chips, and Bitcoin’s anonymity makes it much easier.)
Secondly, what makes it much easier to evade taxes by failing to report Bitcoin payments than evade taxes by failing to report cash or check payments? Taxes work because enough companies and individuals pay them voluntarily that the cheaters can be cross-checked into oblivion. I don’t see why people would be more likely to cheat if they were transacting in Bitcoin instead of cash.
Consider also the USG’s attempts to enforce IP laws. Lots of sound and fury, but totally ineffective so far in actually curbing copyright infringement by individuals. And you know a lot of lobbyist money must be going towards trying to get those laws working. If people ever care about using Bitcoin as much as they care about downloading an album quickly and easily, then it seems to me that government is in trouble.
Taxes work because people like me—highly-paid middle-class employees—find them almost impossible to dodge. Everyone else is the fluff on the side—it’s PAYE (pay-as-you-earn, where taxes are withheld from your earnings) employees who are the backbone of government revenue. And, increasingly, sales taxes. In both cases, the pressure point is businesses, of which there are far fewer than there are citizens.
I hadn’t seen that term, so for others who were in my position,
PAYE = Pay as you earn (presumably payroll taxes)
Yes, sorry, clarification added.
Really? OK, I will assume you’re serious and not joking. A check is drawn on a bank or savings and loan or such, and banks, etc, are heavily regulated and audited by government.
As for cash, the U.S. government makes it inconvenient to pay someone or be paid by someone in cash with “Know Your Customer” banking regulations. They try to make it so that the inconvenience and risk increases at least linearly with the amount of cash involved.
Copyright infringement and gambling do not have the potential to seriously reduce governmental revenue. Consequently, the most competent bureaucrats have not been assigned to controlling those things like they have or will be assigned to controlling Bitcoin.
The U.S. response to infringement has been conducted mostly by the legislature and the judical branch. It would be a lot more effective if the most competent parts of the executive branch, e.g., the Secret Service and the Treasury Department, made it a priority.
Disclaimer: I haven’t studied Bitcoin so these comments should be taken as my rationale for not making the effort to study it.
I was serious, but on reflection, I agree—it’s easy to audit checks, since they go through a bank. You may be right about how large a threat to taxation a strong Bitcoin would be.
Linearly? You don’t have to go up all that far on a linear scale before you reach 100% chance that you will be caught and receive the maximum punishment allowed by law!
I agree you cannot make risk linear with dollars. What I tried to say is that they try to make inconvenience linear with dollars, so that one shouldn’t generalize from the fact that one can take a few 1000 out of the bank in cash and put it in again a few months later without anything happening.
Well, even that’s not right, but I do not have time to be more articulate right now.
Cash is pretty anonymous, but also pretty useless for paying people over the internet. Cheques typically leave an audit-friendly paper trail.