Mt Gox Files Bankruptcy as Customers Lose Faith in Exchange - Update 3

[Strazdas]

made worse by the fact that you are speculating in something with absolutely no actual value whatsoever.

as opposed to? What other speculative good with perhaps exception of actual goods such as wheat or gold has actual value? most speculative good - USD has no actual value either.

 

[J Tyran]

So they have ran away with all the bitcoins then? What happens now though? If they try to cash them in, sell them or try to buy anything can the stolen currency be traced? Unless I am way off the mark for some reason its obviously fraud in most Countries so I guess they could be arrested, in most fraud cases the authorities will try to recover the goods or money so being able to trace the stolen coins would help.

 

[Mister Chippy]

made worse by the fact that you are speculating in something with absolutely no actual value whatsoever.

as opposed to? What other speculative good with perhaps exception of actual goods such as wheat or gold has actual value? most speculative good - USD has no actual value either.

USD has the backing of the United States, basically a promise that it won't go under in a fantastically flashy manner as bitcoin keep threatening to do.

Bitcoin has the backing of absolutely nothing. No country, no company, no product. It doesn't matter that there are some other things people invest in that have no actual vale, it's still a stupid bubble held aloft by nothing but speculation.

 

[Strazdas]

made worse by the fact that you are speculating in something with absolutely no actual value whatsoever.

as opposed to? What other speculative good with perhaps exception of actual goods such as wheat or gold has actual value? most speculative good - USD has no actual value either.

USD has the backing of the United States, basically a promise that it won't go under in a fantastically flashy manner as bitcoin keep threatening to do.

Bitcoin has the backing of absolutely nothing. No country, no company, no product. It doesn't matter that there are some other things people invest in that have no actual vale, it's still a stupid bubble held aloft by nothing but speculation.

Not really. USD has the backing of central bank of america. It does have some reserves, and largest gold reserve on earth too, but nowhere clsoe enough to covering even 5% of the USD value. And US itself has the largest debt in the world. i dont think over 10 trillions of debt is good backing. remember when they were on the verge of economical downfall just last year?
USD can go under, the ONLY thing stopping it from doing so is OUR TRUST in the value of the currency.

The backing you imagine has been outed with the end of gold standard. Unless you consider promises a fair backing. I for one would not consider government promise enough if we went so far as to currency collapsing.

also to note is that was majority of actual USD is OUTSIDE of US and their control. if, say, china would decide to dump all thier USD on the market USD would basically collapse.

 

[Mister Chippy]

Not really. USD has the backing of central bank of america. It does have some reserves, and largest gold reserve on earth too, but nowhere clsoe enough to covering even 5% of the USD value. And US itself has the largest debt in the world. i dont think over 10 trillions of debt is good backing. remember when they were on the verge of economical downfall just last year?
USD can go under, the ONLY thing stopping it from doing so is OUR TRUST in the value of the currency.

The backing you imagine has been outed with the end of gold standard. Unless you consider promises a fair backing. I for one would not consider government promise enough if we went so far as to currency collapsing.

also to note is that was majority of actual USD is OUTSIDE of US and their control. if, say, china would decide to dump all thier USD on the market USD would basically collapse.

Ok, allow me to point out the most obvious logical flaws in what you just said.

#1: The whole "largest debt in the world" thing is just inaccurate, and even then it's based on a very flawed idea of how the economic system works. Read this for a quick explanation of why:
http://www.forbes.com/sites/johntharvey/2012/02/26/national-debt-not-largest/

#2: Why is gold inherently valuable? It's not. It's just what we decided was valuble for quite a while. However as the economic system matured we no longer needed to put our faith in the value of gold and moved it over to currency. If you were suddenly in a post apocalyptic wasteland, gold would be just as valueless and any paper money. It's just a shiny rock.

#3: We weren't exactly on the verge of economic downfall, that was a political squabble between two groups of hardheads who refused to budge on various issues.

#4: The promise from one of the most powerful governments in the world that they will do their best to maintain the value of their own currency is probably the best promise you can take. Like you said, tons of people, governments, and corporations around the world have incredibly large portions of their assets in USD. Nobody would do anything to attempt to crash the USD, because doing so would be catastrophic to everyone. Simply put, the USD has the backing of the entire world, since if it were to ever be in trouble it would cause a total financial meltdown. Nobody like China would ever decide to dump the USD because that would fuck them just as badly as it would hurt anyone else. Besides, the promise of a very powerful government will always be better than lack of any promise or stability whatsoever.

TL;DR - Bitcoin has absolutely no intrinsic value, no support aside from rabid followers, and crashes whenever touched by a light breeze. In fact, it's currently in the middle of crashing right as we speak.

 

[J Tyran]

So they have ran away with all the bitcoins then? What happens now though? If they try to cash them in, sell them or try to buy anything can the stolen currency be traced? Unless I am way off the mark for some reason its obviously fraud in most Countries so I guess they could be arrested, in most fraud cases the authorities will try to recover the goods or money so being able to trace the stolen coins would help.

as others have said you are basically relying on the good will of others not to screw you over as its anonymous. i know the japanese police briefly looked into it and basically said we arent touching it with a 10 foot pole you silly people.

on CNN a few hours ago you have people who lost thousands camped outside mt gox.. well the building thats now deserted and empty of furniture

so yeah they seem to of done a runner and there is absolutely nothing anyone can do unless said people who lost alot of money happened to be doing lots of illegal things with said bitcoins and will track down the thieves who owned company and introduce them to various power tools.

Whether its counted as a currency in the eyes of the law and whether or not organisations trading them are subject to the same kind of regulation a financial exchange would be its still fraud and/or theft and if the Japanese authorities where refusing to look into it that's wrong and incompetent, fraud is fraud whether someone runs away with silver coins or supermarket coupons.

They have started an investigation though, I think you are referring to the buck passing between Japan's typical financial regulators as none of them are admitting to having jurisdiction over the exchange in their capacity as financial regulators. Whether thats because of legislative gaps or because of egg on face isn't clear yet, I think the law will be sorted out in the future though with this incident on top of all the money laundering accusations. The police are investigating it as fraud and/or theft though, just not in the same way they would investigate a bank or foreign currency exchange just yet. The Japanese financial ministry has opened an investigation as well, the US are getting involved as well so if those involved have assets in America they might lose them as well as get arrested if they turn up there.

So "not touching it with a 10ft pole" is a little bit inaccurate.

 

[Mister Chippy]

Actually gold is an INCREDIBLY useful metal in electronics of all kinds and in many different industrial processes and products. It is the best electrical conductor, it is the best conductor of heat.

Gold is needed to create every single modern computer and mobile phone. There is gold in your RAM, gold in your motherboard, Gold in your smartphone, gold on your HDMI cables etc etc etc. Gold, platinum and other precious metals are so vital to electronics that there has been a recent push to try and replace them because there is a very real concern of simply running out.

The group known as noble metals such as Palladium, Gold, Platinum etc all share these similar properties and as such are highly useful in many many fields.

So gold does have an intrinsic value based on its usefulness. As you said a Bitcoin does not. Commodities like gold are susceptible to speculation but they have an underlying use and worth not tied to being a commodity.

I know it's useful, I was just pointing out that the "value" attached to it is primarily as a result of everyone agreeing it's valuable, similar to other forms of currency. Gold doesn't have some sort of innate power that means it will always be worth something.

 

[Mister Chippy]

Gold isn't a currency when traded on the reserve markets. It is a COMMODITY. Most people fail to make this vital distinction when it comes to Bitcoins too. Bitcoin is not a currency, it is a commodity. It is not sanctioned legal tender.

Gold is a different commodity because, as i stated, some of it's value in the 21st century does come from its usefulness. It is like iron or copper, it is traded in the same way. Gold is also decorative, you can't make Bitcoin jewelry.

I know it ain't a currency right now. I was talking about using the gold standard, in which gold really was the currency.

Anyways I kinda did a shitty job with that gold point. I just wanted to point out at least one reason why the gold standard was stupid.

 

[Strazdas]

#1: The whole "largest debt in the world" thing is just inaccurate, and even then it's based on a very flawed idea of how the economic system works. Read this for a quick explanation of why:
http://www.forbes.com/sites/johntharvey/2012/02/26/national-debt-not-largest/

#2: Why is gold inherently valuable? It's not. It's just what we decided was valuble for quite a while. However as the economic system matured we no longer needed to put our faith in the value of gold and moved it over to currency. If you were suddenly in a post apocalyptic wasteland, gold would be just as valueless and any paper money. It's just a shiny rock.

#3: We weren't exactly on the verge of economic downfall, that was a political squabble between two groups of hardheads who refused to budge on various issues.

#4: The promise from one of the most powerful governments in the world that they will do their best to maintain the value of their own currency is probably the best promise you can take. Like you said, tons of people, governments, and corporations around the world have incredibly large portions of their assets in USD. Nobody would do anything to attempt to crash the USD, because doing so would be catastrophic to everyone. Simply put, the USD has the backing of the entire world, since if it were to ever be in trouble it would cause a total financial meltdown. Nobody like China would ever decide to dump the USD because that would fuck them just as badly as it would hurt anyone else. Besides, the promise of a very powerful government will always be better than lack of any promise or stability whatsoever.

TL;DR - Bitcoin has absolutely no intrinsic value, no support aside from rabid followers, and crashes whenever touched by a light breeze. In fact, it's currently in the middle of crashing right as we speak.

1. Were talking about External debt [https://www.cia.gov/library/publications/the-world-factbook/rankorder/2079rank.html?countryname=United%20States&countrycode=us&regionCode=noa&rank=1#us] because that is the onle that actually matters in current economy. National debt or its part of GDP much less so, even then it is currently 70% of your GDP which is simply a terrible state to be in.
I could also pick apart the flaws in your article, but im sure your smart enough to do that yourself. Having large debt during a world war 2 is much different than having one now.
The current US external debt is 15,930,000,000,000 USD and is larger than whole European Union combined. 2013 GDP of US was 16.8 trillion, which is astonishing 94,8%. Almost your whole economy is covered by your external debt.

2. gold is inherently valuable due to its value in eletroconductivity. You know there isnt an electronic device without gold now right? you want radio? theres gold in it. computer? gold in it. phone? gold in it. The amount of gold that is used as "Shiny rocks" is close to 10% of all gold use in the world. You could of couse make the same case with something we are even more relient on, like fresh water, but i just used gold as an example that is usually used as "Secure investment".

3. yes you were. Economists agree that having your debt above 70% level is a no-return zone for economic collapse. Yes there was a lot of political squabling, because your government seems to be run like kids playground where people just throw hissy fits and gobble toys, but the economical danger is very real.

4. USDs popularity leads to its strenght. However its worth noting that for the past decade its value was falling (with obvious exceptions like the bump when Osama was killed). And as USD is being phased out slowly as well (china is slowly getting rid of USD and instead changing it to other currencies such as Swiz franks as well as precious metal reserves), the world will be less and less dependant on USD. Yes, USD is the most backed currency we have, and that was the entire point - even the most reliable currency is extremely unreliable.

No currency has intrinsic value and only has support of its followers. Its just that most currencies we have have followers we call countries. Currencies do crash, see the post-crysis euro crash panic for example. Bitcoin is a very young currency that has very limited capitalization and large speculation influence, of course its going to go all over the place, any currency would. in fact countries that left soviet union in its collapse (like mine) specifically banned speculation for some time and set price rules to avoid exactly that and it still happened. Massive inflation and deflation variation. It stabilized somewhat afterwards, but then we got tied to euro and could no longer see our actual currency value (which btw fallen if we take economy into account).

 

[SexyGarfield]

SNIP


Actually gold is an INCREDIBLY useful metal in electronics of all kinds and in many different industrial processes and products. It is the best electrical conductor, it is the best conductor of heat.

SNIP

Pretty sure you mean silver. Gold is used in electronics on top of more conductive metals like silver and copper because of it's electroplating properties and because it is corrosion resistant.

 

[dumbseizure]

Holy shit thats a lot.

Going by this bitcoinexhangerate.org website, the 750,000 is worth $408 million.

Yep.

Holy shit thats a lot.

 

[Pyrian]

3. yes you were. Economists agree that having your debt above 70% level is a no-return zone for economic collapse.

Economists agree nothing of the kind. Even the authors of the paper that famously showed a correlation to growth drop-off at 90% debt had to walk that conclusion back because it turned out to be a bug in their Excel file. Moreover, while a collapsing economy tends to automatically cause a spike in debt, the vice-versa has never been shown to be a significant factor. And why would it? The notion is "crowding out" where national debt scoops up too much investment capital, which makes perfect sense unless you've got huge surpluses of investment capital, which happens to be exactly the situation we see (in fact it would be basically impossible to have a "bubble" driven economy without such a surplus).

4. USDs popularity leads to its strenght. However its worth noting that for the past decade its value was falling (with obvious exceptions like the bump when Osama was killed). And as USD is being phased out slowly as well (china is slowly getting rid of USD and instead changing it to other currencies such as Swiz franks as well as precious metal reserves), the world will be less and less dependant on USD. Yes, USD is the most backed currency we have, and that was the entire point - even the most reliable currency is extremely unreliable.

"Extremely unreliable"? Please. Compared to what? Certainly not gold or bitcoin. Really, we could use a drop in the dollar. Having an overvalued currency is nice for buying cheap stuff from abroad, but it kind of sucks for trying to be competitive in the international market.

 

[Sniper Team 4]

As of Update 3: So it begins...

This is why the idea behind Bitcoin made me uncomfortable and why I would never get into it unless it was the only currency in the world. All it would take would be one panic, one misstep, and the whole thing would come crashing down. I know countries' currencies are run on the same thing, but they tend to be safer because of the 'faith' behind the actual physical money, and the country's good name. Nothing like that was here for Bitcoin it seemed.

 

[Icehearted]

I don't get how Bitcoin works. Who decided these were worth anything? Why has this gone as far as it has with businesses accepting this new and very volatile "make-believe" currency? It's just got Calvinball written all over it and I'm genuinely baffled at how this all actually translated to real currency in the first place.

Pardon my ignorance.

2. gold is inherently valuable due to its value in eletroconductivity. You know there isnt an electronic device without gold now right? you want radio? theres gold in it. computer? gold in it. phone? gold in it. The amount of gold that is used as "Shiny rocks" is close to 10% of all gold use in the world. You could of couse make the same case with something we are even more relient on, like fresh water, but i just used gold as an example that is usually used as "Secure investment".

I remember reading all about this once, maybe nine years or so ago, where someone broke down the reasoning behind the value of gold in the first place, which if I remember right was akin to the diamond cartel inflating the price of diamonds despite the fact that they are very common and very easy to replicate. He wrote that gold is not as conductive as other metals like silver, and he wrote that it had to do with amounts and rarity above and below the surface of the earth. He then added that silver was in actuality rarer than gold and therefore should be a more precious metal.

If I understand Mister Chippy, the sense here is that it's only valuable because someone at some point just decided it was, kind of like diamonds and Bitcoin. That actually sounds about right to me.

 

[Mylinkay Asdara]

I suppose it's entirely too much to hope that all these economic ups and downs and hiccoughs in these made up currencies inspires a rethinking of the entire economic system ideas in the world that somehow gets us to the point where money ceases to exist - ala Star Trek, not back to trading goats for firewood.

Probably.

I never really understood the Bitcoin thing anyway, except as a way to buy things you aren't supposed to with untraceable monies - the whole point seemed lost when corporations and governments got in on the whole gig. /shrug.

 

[Ukomba]

Oh no, this obvious ponzi scheme had 127,000 go missing to hackers? How suspiciously convenient. I hope the people invested in all the other bit coin dealers have enough time to get their money out before convenient excuse, I mean hackers, happen there too.