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You are totally misundersting how it works. A cryptocurrency that can be exchanged directly (by the Fed) with cash doesn't change how anything currently works. The author points this out:

"The existence of cash doesn't get in the way of this process, nor has it ever gotten in the way. Bringing in a third liability type, Fedcoin, the quantity of which is designed to fluctuate in the same way as cash, would likewise have no impact on monetary policy."

I.E., the Fed can debase the "FedCoin" cryptocurrency just as much as they can debase USD.

The most important aspect of the Federal Reserve Bank is that it was established by a small British Bank and 5 private families. They automatically pass their privately held shares down from one generation to the next. It is not "federal" in any sense.

The Federal Reserve Bank is the fake name they gave the bank so that the public would not examine or challenge it. These handful of people have been ruining (yes, I meant ruining, not running) the U.S. economy since its onset for the purposes of keeping control of the U.S. financial picture and ensuring their 1% position.

The manner in which its discussed here gives it far too much importance when in fact it is a private bank that can be resolved as easily as we got rid of the pony express and outhouses.

Simply take away its power and move on. You do that by being serious about establishing crypto currency and rendering the 5 private families control obsolete.

The only importance the Federal Reserve Bank holds is the importance you continue to give it.

We used to travel by horse and buggy and we lit our homes with gas lanterns. It's time to dispense with this relic of a banking system that no longer serves any purpose other than to enrich a handful of families.

As Americans, we should all be ashamed and embarrassed that as a nation we've let this farce go on as long as it has. The only people wanting to keep it in place are those with contracts to make peripheral revenue from it as long as it holds it position.

Consider how fraudulent it is that years after its inception, this private group still has the only monopoly on printing money. The creation of the Federal Reserve Bank in itself is one of the biggest financial frauds that has ever taken place and most didn't even notice.

Yet even you guys, whom are embarking on crypto currency, considered the future world economy, still genuflect when you see a U.S. dollar.

curious why in your worldview the government bothers collecting taxes, let alone $3 trillion of it annually. (33% of the GDP.) It seems you think their budget comes from the roughly 2% annual inflation rate we've had for the past few years. (1.7% this year.)

[1] Taxes collected: http://www.usgovernmentrevenue.com/current_revenue (first paragraph should obviously read 17.3% not 173%)

[2] Inflation: http://www.inflation.eu/inflation-rates/united-states/histor...

(or http://en.wikipedia.org/wiki/Taxation_in_the_United_States and https://www.google.com/search?q=current+inflation+rate+unite... )

>The entire purpose of the Federal Reserve is to enable a system of monetary expansion or contraction

This is just one of several mandates that the Fed has. The Fed also exists to supervise and regulate banking institutions, in addition to running the national payment system.

The author's post could fall under the latter responsibility.

> The Fed also exists to supervise and regulate banking institutions

So how, exactly, in a world where bitcoin was king (and pigs could fly) would the fed "regulate" bitcoin institutions?

You cannot do fractional reserve banking in bitcoin without all your loans being blatantly obvious and public. Users would track the coins they put in the wallets you control in their name, and if you touch them they will raise hell. You don't need consumer protections in that system because everything is public. And I don't condone whatever privacy violations would be necessary to audit a bitcoin banks wallet security infrastructure, when they can naturally (in the same way services like bitfinex and campbx have sought security accreditations) do so on their own as a competitive advantage without any unnecessary violence.

So what exactly is the federal reserve going to do to bitcoin wallet holders (aka bitcoin banks) besides the above? Bitcoin as property is just as prosecutable in court if your bank fucks up and loses your money as any other asset, I can't believe that is reason for an entire bureaucratic federal infrastructure to exist.

We did fractional reserve banking w/ the gold standard. There is no reason you couldn't do fractional reserve banking on top of bitcoin, with the bitcoin replacing gold.

I don't mean you cannot do it, you just cannot obfuscate where the money goes, since you can trace bitcoins across the block chain unless people are actively and intentionally diluting them, in which case you know where the paper trail ends and thus who was doing that.

Sure you can! Remember Fedcoins have convertability to paper, and paper has convertability to Fedcoin. That means that Fedcoin can be created and destroyed at will by the Fed.

Since nobody knows the total amount of cash in circulation (maybe not even the Fed) it's basically impossible to prove that the Fed "printed" Fedcoins by making them up rather than "legitimately" converting cash into Fedcoins.

It's not as though the Fed is going to mark the provenance of the coins to facilitate people analyzing the system. All cash that gets converted to Fedcoin comes out of the Fed's wallet and all Fedcoin that gets converted to cash goes into the Fed's wallet.

The whole point of bitcoin is that you don't need a central authority to keep people from making up an infinite number of "chits". But if you're going to have a system where there are some folks in charge there's no need to have a blockchain; it's an artifact of the need to have a decentralized authority system. If they can create and destroy at will for convertability to work, they can create and destroy at will to print money.

You cannot do fractional reserve banking in bitcoin without all your loans being blatantly obvious and public. Users would track the coins they put in the wallets you control in their name, and if you touch them they will raise hell.

Did that happened with Mt.Gox or any of the other "web wallets" where all BTC is mixed in various addresses? How do you even know if they're touching "your" Bitcoins or theirs? There's no such thing as "a" Bitcoin that you can track.

You don't need consumer protections in that system because everything is public.

The ownership of the addresses isn't. The bank just transferred X BTC to another wallet, is that an internal reshuffle or a loan?

"Users would track the coins they put in the wallets you control in their name, and if you touch them they will raise hell."

That's not a bank, that's a security service that users would have to pay for. There is nothing about bitcoin that prevents banks that run the traditional way where I loan bitcoin to the bank and the bank loans bitcoin to home buyers and such and give me back some small interest at some negligible risk.