51–60 of 176 posts
You can see the full interview here: https://www.youtube.com/watch?v=NfNgntAQ6EM&t=35s
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.
So it kinda does make sense they accept it, since they can ultimately use it.
Earlier quoted context omitted.
>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 f…
The system does include IOUs but those don't move around. When you give your hard cash to the bank it creates an IOU, that's what the balance you see when you login is. Your bank then lends out the hard cash to other people.
When you pay with your credit card the bank is still giving the merchant real money, the merchant would receive actual on-chain Bitcoin, but you're simultaneously creating a Bitcoin IOU which you promise to pay the bank.
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)
Earlier quoted context omitted.
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 f…
This is mostly correct but you have one thing backwards. When you pay the coffee shop (with a debit card) you're not giving them an IOU, you're giving them the same kind of dollars which you originally deposited into the bank. The system does include IOUs but those don't move around. When you give your hard cash to the bank it creates an IOU, that's what the balance you see when you login is. Your bank then lends out…
When I pay coffee shop with a debit cards, exactly what happens is that the bank just tells me that hey, we owe you now less, and we owe the coffee shop a bit more. At that point there is nothing else happening. I am definitely not giving any "real" dollars because I do not have them left, but I have lent them to the bank so that I have only the IOU from the bank left.
What you see in your bank account is at the same time real money (as usually talked about), but really really nothing but a bank's promise to pay you some later day real real dollars.
And because it is so convenient, most people are perfectly happy with moving around these IOUs, the coffee shop owner can then walk to the bank and request that the bank actually pays the dollars (or bitcoins) that the bank owes, but it is quite rare that happens - and that is the whole point of fractional reserve banking.
Earlier quoted context omitted.
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 s…
It's true that today you would probably find it difficult to find someone who will take your Bitcoin and pay you Bitcoin-denominated interest with it. However, there's no fundamental reason why it couldn't happen.
The process is: You give your Bitcoin to a bank. It is put into a UTXO which they control, and you don't control. In exchange, you have a balance in the bank which you can withdraw when you choose. Your balance is "virtual bitcoin", but is still real money, because it represents your ability to ask the bank to pay people for things. (By swiping your debit card)
At the same time, the bank has the original on-chain Bitcoin, and is free to use it however it wants, probably by lending it out to somebody else.
In this way, there is now more Bitcoin than there were previously. Fiat currency is not involved in any way. I'm not an economist, but I'm pretty sure it's exactly the same as the difference between M0 and M1.
Long winded political statement by some economics professor. Why is this interesting?
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,…
There will for sure be a regulator to stop that. In fact, there are already numerous regulators to stop it. If you want to hold deposits for your customers who happen to be California residents, then you are a bank and will need a banking license from the California Department of Business Oversight. California does not care what currency those deposits are denominated in. I expect this to be true everywhere else in the world, cryptocurrency is not some alternative universe where the old rules won't apply.
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,…
Frances Coppola [0] has written fairly extensively on this topic, as has the Bank of England [1]
[0] http://www.coppolacomment.com/2017/10/money-creation-in-post... [1] https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m...