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Do We Need Central Banks? (2017)

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Re: Do We Need Central Banks? (2017)

#41

Post by mseebach »

brian_cloutier wrote: post #31
QML wrote: post #29

Earlier quoted context omitted.

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_ su…

I'm with you so far, but the bit I don't understand is that for bitcoin to be said to support fractional reserve, don't you need to have the balance of your loan issued in bitcoin as well, so that you can pay other people for services in bitcoin, and they can use that to get a new loan etc? It doesn't seem fair to say that bitcoin works for a given purpose, if "working" presumes the presence of a trusted fiat money system?

Re: Do We Need Central Banks? (2017)

#42

Post by alexhutton »

The purpose of central banking is to protect private banks from bank runs. Free banking operated prior to the introduction of central banking and it was less stable. In free banking a bank either had the capital to pay its depositors or it didn't, and if it didn't it failed. Although this was a less stable situation it meant that credit couldn't expand indefinitely because each time one of the periodic bank failures occurred it would would reduce the money supply.

Another way to prevent credit expanding indefinitely would be to eliminate fractional reserve lending. But that wouldn't work out well for governments who often borrowed from banks to finance wars and other actions that were not supported by their citizens.

Re: Do We Need Central Banks? (2017)

#43

Post by sect2k »

sjehay wrote: post #36

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)

Yeah, his citations are mostly his own papers, seems like a giant red flag.

Re: Do We Need Central Banks? (2017)

#44

Post by beefield »

alexhutton wrote: post #42

The purpose of central banking is to protect private banks from bank runs. Free banking operated prior to the introduction of central banking and it was less stable. In free banking a bank either had the capital to pay its depositors or it didn't, and if it didn't it failed. Although this was a less stable situation it meant that credit couldn't expand indefinitely because each time one of the periodic bank failures…

It is difficult for me to see how fractional reserve lending could be eliminated given the current level of technology and economical incentives there are for fractional reserve lending. I mean, of course, you could say that regulated financial institutions are not allowed to do fractional reserve banking, but only result of that would be unregulated shadow banking institutions doing the same.

(Which, as a side note, is something I would be more than curious to know from cryptocoiners, how they are going to stop fractional reserve banking to flood crypto currency supply, as for sure there is no regulator that is going to stop that.)

Re: Do We Need Central Banks? (2017)

#45

Post by ironcan »

sect2k wrote: post #43
sjehay wrote: post #36

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)

Yeah, his citations are mostly his own papers, seems like a giant red flag.

Not his first rodeo either, see his talk page at Wikipedia: https://en.wikipedia.org/wiki/User_talk:Rawjapan

Re: Do We Need Central Banks? (2017)

#46

Post by gst »

ckastner wrote: post #6

It's a long article and I admit to not heaving read it in its entirety, but... > There are overcapacities in the banking sector of some countries” in the Eurozone. Which country could he have been talking about? Germany boasts by far the largest number of banks – about ten times as many as the global centre of international finance, the UK. Same here in Austria. Per capita, the people employed in the banking sector i…

> Same here in Austria. Per capita, the people employed in the banking sector is significantly higher than in other countries.

Yet it's usually a hassle to find an ATM in Austria (which is the most important thing related to banking that I can't do online), because ATMs are usually only located at banks.

Compare that to the US where every other shop as a private ATM that you can use. They usually charge $2 or something like that, but (better) banks usually refund those fees at the end of the month.

Re: Do We Need Central Banks? (2017)

#47

Post by beefield »

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…

What is created is an IOU. A bank says that hay, I will pay 1 usd to you. And you can transfer that IOU to the coffee shop. Now, there is literally nothing stopping the "bank"[1] to make a bitcoin IOU and you to transfer that to the coffee shop owner. In that case you have increased the monetary supply of "bitcoins", as it is irrelevant for the coffee shop owner if he is receiving a bitcoin or an IOU of one bitcoin from a credible institution. There is no difference to the case where it is irrelevant if you get a dollar bill or a IOU from a bank. Both are called dollars for a very good reason, and if you just swap dollar to bitcoin, both can be called bitcoin.

[1] Well, except current regulators, but they obviously do not exist in bitcoin economy...

Re: Do We Need Central Banks? (2017)

#49

Post by gst »

badminton1 wrote: post #28
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.

> 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.

With a pruning client you only need to store a small subset of the blockchain and there are no major changes in regards to trust. Your client still verifies every single transaction, but it removes data from the chain that it won't need anymore in the future (e.g., an old transaction that already has been spent).

With a SPV client your client only stores the chain headers and then only requests the required data from a server. SPV clients need a small amount of resources and can run on mobile phones. At the same time most of the important functionality (transaction signing, transaction verification, ...) happens still locally and the level of trust that you need to put into the servers is quite small.

Re: Do We Need Central Banks? (2017)

#50

Post by hobofan »

gst wrote: post #49
badminton1 wrote: post #28

Earlier quoted context omitted.

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.

> 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. With a pruning client you only need to store a small subset of the blockchain and there are no major changes in regards to trust. Your client still verifies every single transaction, but it removes data from the chain that it won't need anymore in the future (e.…

Even beyond simple pruning, there are techniques that currently don't seem to be in use yet and should make chain-size a non-issue for the near future. If written about it in another comment here before[0].

[0]: https://news.ycombinator.com/item?id=16929524

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