[ExI] What happens when Bitcoin goes to a million bucks?

[Brent Allsop]

Transhumanist economists,

As most of you know, in 2010, some guy purchased about $25 worth of 
Bitcoin, which is now worth over $800K.  My working hypothesis is that 
this will continue and that before 2020, Bitcoin will be worth a million 
bucks.  It's so funny to tell people that, and see them look at you with 
that "Your CRAZY" look in their eyes, as they say "A Bitcoin isn't going 
to be worth a million bucks!"

Have you checked the price of Gold, lately?  It's been crashing, 
dramatically, for 2 years now.  Why do you think?  The so called gold 
experts, are saying things like:

"The bear market in gold has been going on for two years. It seems to 
fly in the face of fundamentals, as central banks print enough currency 
to paper the world."

Once you factor in the fact that there is a new competitor in town, and 
that people are starting to sell Gold to buy Bitcoin, that explains what 
otherwise doesn't make sense to these traditional gold "experts" that 
have made lots of money up till two years ago.  In other words, All the 
money that is in the pockets of holders of Gold, is now flowing into the 
pockets of holders of Bitcoins, at a very rapid rate.

And My belief is that this Gold casualty that is just getting started, 
is just the first casualty.  It will soon spread to stocks, bonds, real 
estate, and anything with value that can be sold.  All the money in the 
pockets of the people holding them, will be quickly draining into the 
pockets of Bitcoiners at an increasing accelerating rate.

Bitcoin, as many experts are starting to say: "is simply the best 
investment out there, bar none."  So what would you expect?  Money flows 
to where it is treated the best, just like water flows downhill.  And if 
you have a Bitcoin in your pocket, that is looking increasingly tempting.

As the cost of money and interest rates starts to skyrocket, as all 
sources of capital continue to flow into Bitcoin what will happen? I 
think at least the following will happen:

1.    People will be selling anything they can liquidate, so they can 
buy Bitcoin.  Even at a loss, since that loss will soon be made up for, 
once it is in Bitcoin.  (Do you think a tax penalty of 10%, will stop 
people from liquidating their IRAs?)
2.    People will be borrowing money, mortgaging things, like their 
house, to buy Bitcoins, because no interest rate will come close to the 
rate at which Bitcoin will continue to go up.
3.    The price of stocks will decline.  The PE ratio of stocks has 
historically been at around 20.   This will drop by half or more, as 
nobody will want to buy stocks, unless it is a very good value.  The 
greatly reduced PE, will become "the new normal" and it will be much 
harder to make money by going public.
4.    Interest rates will go up significantly, because of the demand for 
money, to buy Bitcoins.
5.    The economy will convert from a consumer economy with lots of debt 
to everyone will only want to only buy something when they absolutely 
need it.  As it will be far better to spend it on something that will be 
worth 10 times its value in a year or so.  It will convert to a bit time 
saving economy.  Will this stabilize the boom and bust cycle?
6.    The Winklevoss twins will be laughing at Facebook, and Zukkerberg, 
as Facebook  stock price continues to decline and fails to keep pace 
with their 1% of all bitcoins.

When we head into a recession, the fed lowers the interest rate to Zero 
to provide 'liquidity' and in hopes people will borrow money to invest 
in the economy.  But this doesn't work very well as there is nothing 
that is making money, to make it worth borrowing during a recession.

But Bitcoin will change this dramatically.  Everyone will want to borrow 
money even more in a recession, as recession will cause Bitcoins to go 
up even faster than they are now.  People will have even less motivation 
to invest in the economy.  So there will be two market forces.  Bitcoins 
driving up interest rates, and the federal reserve printing money and 
trying to lower interest rates.  People will be borrowing this printed 
money, purchasing Bitcions.  WIll that cause rapid inflation of fiat 
currency?

Who will win such an epic battle between Bitcoin trying to increasa 
interest rates, and the Fed trying to lower them?  What will the effect 
be, when Bitcoin starts rapidly approaching one million $$ ?

My minds seems to get all scrambled when I try to analyze such.  Can you 
guys help provide some additional rational to my attempt to get my head 
around what could happen?  Could everyone brainstorm some of the long 
term possibilities, here?

I've tried to browse some of the Bitcoins forums for some intelligent 
information on this, but all of them are idiots that can only think 
linearly, and they haven't got a clue.  While Transhumanists are good at 
thinking exponentially.  So, what are some of the more extreme 
possibilities you guys see?

One thing I feel for sure.  Everyone should have at last one Bitcoin.  
And people only say there is no such thing as a "Get Rich Quick Scheme", 
because they don't know how close the singularity is.

Brent Allsop