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Do We Need Central Banks? (2017)

professorwerner.org

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Re: Do We Need Central Banks? (2017)

#31

Post by brian_cloutier »

QML wrote: post #29
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…

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 impleme…

Okay, I think I see where the misunderstanding is. I'm not imagining an on-chain and fully decentralized solution. You're right that that sounds difficult.

I'm imagining a contract with a bank. As in, you literally go and talk to Chase bank and draw up a contract and give them Bitcoin and they promise to give it back to you later plus interest.

Such a system is very possible today, and in that sense Bitcoin _does_ support fractional reserve. Fractional reserve is not a feature you explicitly add, it's an emergent property of a banking system, you really don't need to do very much to "support" it.

Re: Do We Need Central Banks? (2017)

#32

Post by sonnyblarney »

This is a highly problematic article because the basis of his claims revolve around two iffy concepts:

1) That interest rate movements follow the economy, not the other way around. This is false if you simply consider a different time frame for action. If you look at the graphs next to one another it may appear that his theory is correct, but if you consider a longer term causality ... then he's wrong and the bankers are right.

2) More disturbingly - he basically looks at post-war China, German, Japan and Korea as examples of where you can achieve 'high growth' without the neoclassical market liberalism type approach.

This is ridiculous. It's very difficult to find value creating projects in mature economies. When your country is flat on it's back after a war - it's dam easy - especially if that country needs to 'rebuild what was already there' after a war (i.e. social/governmental institutions intact) - as opposed to 'building what was never there on the back of nothing' i.e. African countries.

Heyzeus everyone knows this. Germany had no factories for gosh sakes. Maybe build some factories? Some roads? Power stations? etc. etc..

Most civilized nations rebounds sharply after disaster and it can be done with 'government intervention' because the investments needed are generally fairly obvious and lend to that governmental kind of stuff anyhow, i.e. infrastructure.

So basically, his primary claims are false, the second one, surely so.

Surely there are other options than having Central Banks - and they could feasibly operate more mechanically etc. - and surely we could just have stricter rules about money ... but if we want monetary policy of some kind, well then there's going to be a 'Central Bank' however you want to call it, 'committee' or whatever. Even if we go crypto, if there is flex in that crypto, then someone will have to decide how that algorithm works and evolves, and that team will effectively be 'the central bank'.

Re: Do We Need Central Banks? (2017)

#33

Post by pjc50 »

dogma1138 wrote: post #4
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…

Since there is no fractional reserve and the blockchain ensures that you have the equivalent of fully correspondent banking with each node in the network there is no need for a central bank on the other hand the blockchain itself can be viewed as is the central bank with the large mining pools acting as its board of directors. That said since no blockchain currently offers a credit system it’s not really possible to…

Bitcoin exchanges certainly can "print more bitcoin" in the same sense as fractional reserve banking - the exchange doesn't have to have a stash of coins that exactly corresponds to the sum of bitcoin-denominated customer accounts. Mtgox blew up by being a fractional reserve "bank" destroyed by a "bank run".

Heck, bitcoin exchanges can even print ""dollars"" in the form of USDT.

> should the economic system be based on credit and interest or not

This is almost unavoidable - remember that every not yet paid invoice is a form of credit.

Re: Do We Need Central Banks? (2017)

#34

Post by sonnyblarney »

dogma1138 wrote: post #4
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…

Since there is no fractional reserve and the blockchain ensures that you have the equivalent of fully correspondent banking with each node in the network there is no need for a central bank on the other hand the blockchain itself can be viewed as is the central bank with the large mining pools acting as its board of directors. That said since no blockchain currently offers a credit system it’s not really possible to…

Not really.

With most cryptos, there is really a strict pre-established monetary policy baked into the algorithm with really no flexibility at all.

"A better question would be not if we need central banks but rather should the economic system be based on credit and interest or not."

I think a better way to say it: "Do we need monetary policy or not" - and I think the answer is 'yes' - so whether it's crypto or not ... there will have to be some kind of group/committee making those rules, and that's de-facto the central bank.

Re: Do We Need Central Banks? (2017)

#35

Post by dragonwriter »

yasp wrote: post #22
nfoz wrote: post #13

Earlier quoted context omitted.

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 th…

> 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

Empiricism is a philosophical approach; Austrian economics isn't any closer to “philosophy” than empirical economics is, it just is closer to the particular (and widely rejected in most of modern Western philosophy though it survives in a form within some schools of Christian theology as well as Austrian economics) philosophical belief that claims about material facts can be justified a priori by deduction from axioms alone without reference to a posteriori knowledge.

Re: Do We Need Central Banks? (2017)

#36

Post by sjehay »

I zoned out at Section II ("The Central Banking Narrative Has Collapsed") because every single paper he cites is written by him (and in fact so are 18 of the 20 publications he cites in the entire article)

Re: Do We Need Central Banks? (2017)

#37

Post by badminton1 »

It has been only 200 years since the industrial revolution and we have managed to completely waste the planet.

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

We are running out of topsoil, fresh water, fish, pollinators, oil... the oceans are becoming an acid mess full of plastic, species are going extinct, forests and the ecosystems they contain are disappearing.

And all of this has been done in the name of a dumb belief system we call modern economics. A better name for it is collective suicide, because that's what it is in the long term.

The idea that you can have a bunch of banks making infinite money to fund an endless amount of economic activities for infinite people has nothing to do with reality: a finite planet with finite resources with finite species that can only go extinct once, and a fragile ecosystem that needs to be taken care of and is beyond our means to repair.

Maybe we don't need central banks, but we need fucking reason governing our economy, not the greed of a few shortsighted apes.

Re: Do We Need Central Banks? (2017)

#38

Post by Marazan »

yasp wrote: post #3

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

Brilliant.

Continually proven wrong again and again and again but sure to be right eventually.

Damn those irrational actors. Why can't everyone be as rational as an Austrian.

Re: Do We Need Central Banks? (2017)

#39

Post by Reason077 »

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.

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

There are a number of countries who's currencies are pegged to the US dollar at fixed exchange rates. Notably Hong Kong, as well as gulf states such as the UAE, Saudi Arabia, Qatar, etc.

This means their central banks have very limited scope to control domestic money supply and interest rates via monetary policy.

Re: Do We Need Central Banks? (2017)

#40

Post by yasp »

Marazan wrote: post #38
yasp wrote: post #3

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

Brilliant. Continually proven wrong again and again and again but sure to be right eventually. Damn those irrational actors. Why can't everyone be as rational as an Austrian.

Rationality and efficient markets are never mentioned once, to my knowledge, in Man, Economy, and State.
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