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Do We Need Central Banks? (2017)

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Re: Do We Need Central Banks? (2017)

#21

Post by throwaway8121 »

brian_cloutier wrote: post #14
dogma1138 wrote: post #5

Earlier quoted context omitted.

That’s the gist of it the blockchain offers most of the “services” provided by the central banking primarily correspondent banking (well sort off since you don’t have to manage correspondent accounts as you have a single ledger) and it also offers a consensus forum (most of them do at least) which acts as the board of directors of a central bank. The big difference is that unlikely most fiat currencies there is no cr…

As I pointed out in another comment in this thread, fractional reserve is just as possible with Bitcoin as it is with cash, it's not like banks increase the money supply by printing cash. If you give your money to a bank it won't be sitting in an account you have the key to, it'll be the bank's to control and they'll be free to lend it to other people. This might even be a desirable state of affairs: money which you…

You can't do that with Bitcoin as the interest rate they'd have to pay on deposits would kill the bank, and the interest rates on loans would make the loans undesirable.

Re: Do We Need Central Banks? (2017)

#22

Post by yasp »

nfoz wrote: post #13
yasp wrote: post #3

Probably not. I suspect the Austrian school of economics will be proven right about money and credit eventually.

What does that mean? I'm not versed in economics, and generally find it overwhelming to look into, because of deeply-set political opinions and implications buried in all of it. Is "economic school" a political choice (differing goals) or a choice of tooling/methodology?

The Austrian school overall disavows empiricism as the means by which to infer economic laws and instead views economics as a field closer to philosophy. For more information on the method I recommend the pamphlet Economic Science and the Austrian Method. [0]

Re: my previous comment, that, in short, money and credit are like any other markets.

If you're interested in a gentle introduction to the Austrian school of thought I recommend the book Man, Economy, and State. Skip the final section of the book entitled Power and Market. [1]

[0] https://mises.org/library/economic-science-and-austrian-meth...

[1] https://mises.org/library/man-economy-and-state-power-and-ma...

Re: Do We Need Central Banks? (2017)

#23

Post by dragonwriter »

nfoz wrote: post #13
yasp wrote: post #3

Probably not. I suspect the Austrian school of economics will be proven right about money and credit eventually.

What does that mean? I'm not versed in economics, and generally find it overwhelming to look into, because of deeply-set political opinions and implications buried in all of it. Is "economic school" a political choice (differing goals) or a choice of tooling/methodology?

> Is "economic school" a political choice (differing goals) or a choice of tooling/methodology?

That...depends on the “school”, and exactly the bounds of the “political”. The choice between the Austrian school and most of the rest of economics is between an interpretive framework that eschews empirical science as inappropriate for the field of economics (Austrian school) vs. various approaches that at least outwardly aspire to the norms of empirical science (most of the rest of economics.)

Among the schools espousing empiricism, confirmation bias (and thus political preconceptions) still plays a role between, say, neoclassical schools like Chicago and Keynesianism and it's offshoots, but that's at least in part because economics is hard due to confounding variables, and actually avoiding influence of confirmation bias in such circumstances is difficult even when intelligent people are acting in the best of faith.

Re: Do We Need Central Banks? (2017)

#24

Post by shanghaiaway »

TomMarius wrote: post #20
shanghaiaway wrote: post #16

Earlier quoted context omitted.

Governments are never going to adopt a currency controlled by foreign entities.

Really? In many parts of the world (outside of the US, e.g. Georgia), dollar is used/accepted even for taxes.

No country has adopted a foreign currency to make their central bank impotent.

Re: Do We Need Central Banks? (2017)

#25

Post by brian_cloutier »

dogma1138 wrote: post #15
brian_cloutier wrote: post #14

Earlier quoted context omitted.

As I pointed out in another comment in this thread, fractional reserve is just as possible with Bitcoin as it is with cash, it's not like banks increase the money supply by printing cash. If you give your money to a bank it won't be sitting in an account you have the key to, it'll be the bank's to control and they'll be free to lend it to other people. This might even be a desirable state of affairs: money which you…

As I pointed out no where was stated that it’s not technically possible but that it’s not practiced or supported by current mainstream cryptos. If anything some of the larger blockchains “naturally” move towards a “central bank” like model. Say you have a blockchain that requires you to sync 100’s of terabytes if not petabytes of information to setup a new node and 100’s of gigabytes a day to keep it upto date. It’s…

That's not really true though. For one:

> supported by current mainstream cryptos

There's nothing that needs to be supported. Bitcoin already "supports" it, in the same way that cash does. All you have to do is find a counterparty and draw up a contract.

> it’s not practiced

That part's mostly true because with this kind of volatility who would risk owing you a bunch of bitcoin, but loans involving Bitcoin are starting to appear: https://saltlending.com/

I wouldn't necessarily trust https://www.bitbond.com/ with _my_ bitcoin, but theoretically I could, and this is starting to look a lot like fractional reserve.

Re: Do We Need Central Banks? (2017)

#26

Post by kirushik »

shanghaiaway wrote: post #24
TomMarius wrote: post #20

Earlier quoted context omitted.

Really? In many parts of the world (outside of the US, e.g. Georgia), dollar is used/accepted even for taxes.

No country has adopted a foreign currency to make their central bank impotent.

Seems like at least Ecuador did:

> The present currency of Ecuador is the United States dollar.

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

Re: Do We Need Central Banks? (2017)

#27

Post by brian_cloutier »

closeparen wrote: post #17
brian_cloutier wrote: post #9

Earlier quoted context omitted.

There's no fundamental reason why Bitcoin shouldn't also have fractional reserve. I mean, cash also has a fixed supply! (from the Bank's POV) It's not like Chase Bank (or whatever non-central bank) can just print more dollars. If you just sit on your Bitcoin it collects 0% Bitcoin-denominated interest. Maybe you'd prefer to make a loan to a bank and have them pay you interest. For the term of the loan that money isn'…

>It's not like Chase Bank (or whatever non-central bank) can just print more dollars. Yes, it can, that's what fractional reserve means. Banks create (most of) the money they lend. This is regulated by the central banks but carried out via ordinary retail banking. When you swipe your credit card, buy a car, etc. money is being created out of thin air. The universe remains balanced because it corresponds to your oblig…

I don't think you understand what I was trying to say. I'm well aware that they create money, but they're literally not printing dollars. They do not cause M0 to increase.

Nobody but the Treasury can cause physical dollars to be created, but that doesn't prevent fractional reserve from occurring.

So, anybody who claims Bitcoin doesn't support fraction reserve based solely on the fact that banks can't create new Bitcoin is incorrect.

Re: Do We Need Central Banks? (2017)

#28

Post by badminton1 »

TekMol wrote: post #2

It's interesting to think about how the role of central banks might change in the age of crypto currencies. Governments can print Euros and Dollars. But not Bitcoin and Ethereum. Popular theory is that governments have a good grip on currency usage because they can decide which currencies they accept for tax payments. And because they can force merchants to accept certain currencies. It will be interesting to see if…

Bitcoin so far doesn't scale. Not only in terms of transaction fees and processing times... but also at the most basic of levels.

What will happen when the blockchain doesn't fit in a median harddrive?

The decentralization narrative will go away. Only a few people will have enough storage for the blockchain and you will go back to having to trust someone.

Re: Do We Need Central Banks? (2017)

#29

Post by QML »

brian_cloutier wrote: post #14
dogma1138 wrote: post #5

Earlier quoted context omitted.

That’s the gist of it the blockchain offers most of the “services” provided by the central banking primarily correspondent banking (well sort off since you don’t have to manage correspondent accounts as you have a single ledger) and it also offers a consensus forum (most of them do at least) which acts as the board of directors of a central bank. The big difference is that unlikely most fiat currencies there is no cr…

As I pointed out in another comment in this thread, fractional reserve is just as possible with Bitcoin as it is with cash, it's not like banks increase the money supply by printing cash. If you give your money to a bank it won't be sitting in an account you have the key to, it'll be the bank's to control and they'll be free to lend it to other people. This might even be a desirable state of affairs: money which you…

Talks about a credit system built upon a blockchain naturally transition to talks about an identity system; otherwise, how would you prevent Sybil attacks [1]?

However, I am unsure to how the latter will be solved without a central, trusted party. What is the digital analogue of a passport or driver's license, a piece of identification that is hard to forge?

To add on to why fractional reserve will be hard to implement with cryptocurrencies, another unexplained problem is the issue of collateral backed by a volatile asset.

If that underlying asset rises in value, then the effective interest rate would be equal to the original interest rate + % increase in value; if the opposite occurs, a decrease in value, the 'bank' in this scenario might lose money on that lend.

You might argue that a digital stable-coin is a possible solution. But a digital asset backed by a physical object is probably bound to encounter regulations; and the performance of a stable-coin backed by algorithms is currently unknown to work.

These are two hard problems that have to be solve before fractional reserve is viable on a blockchain.

[1] https://en.wikipedia.org/wiki/Sybil_attack

Re: Do We Need Central Banks? (2017)

#30

Post by pjc50 »

shanghaiaway wrote: post #24
TomMarius wrote: post #20

Earlier quoted context omitted.

Really? In many parts of the world (outside of the US, e.g. Georgia), dollar is used/accepted even for taxes.

No country has adopted a foreign currency to make their central bank impotent.

Several small countries have "dollarised". Ireland for decades ran an "independent" currency that had the same value as the pound and decimalised on the same day.
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