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Do We Need Central Banks? (2017)

professorwerner.org

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Re: Do We Need Central Banks? (2017)

#71

Post by beefield »

soVeryTired wrote: post #60
beefield wrote: post #44

Earlier quoted context omitted.

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,…

Fractional reserve banking doesn't exist anymore. Banks lend against their loss-absorbing capital, not their reserves. Reserves are just used for inter-bank settlement. 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...

Coppola (and most other people claiming to "reveal" something profound of financial system when they tell that banks do technically not lend deposits forward) is confused in my humble opinion.

There is no need for double entry accounting trickery nor loans to create money. All bank needs to do is to say that they owe me money and they have created money at that very moment.[1] Simple as that. And they do create money without lending all the time! It is nothing special. When a bank "pays interest" to your account, do you think there exist some new loan that is needed for that money to exist? Nope. Bank just decides that now it is time to add some more money to your account. That's it. Or when bank pays salaries to the personnel or dividends to the shareholders? Nope. No lending associated whatsoever. Just money added to their bank accounts. (for simplicity's sake, I assume that the stakeholders have their bank accounts in the same bank)

[1] Which to me implies that there is not that much interesting happening at that point. I mean, a bank could enter a few centillion dollars to my account, and technically the money would be created. But in practice that is laughable. Nobody in their right mind would imagine a second that the bank would be solvent and actually be able to pay me the money, so in reality that money does not exists (no credit...). So even if the traditional model of banks lending deposits forward is technically even more wrong than the banks create money from double entry accounting trickery, in reality that describes much better what actually economically is happening in the financial industry. But that is just my opinion...

Re: Do We Need Central Banks? (2017)

#73

Post by beefield »

brian_cloutier wrote: post #59
beefield wrote: post #44

Earlier quoted context omitted.

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,…

> (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.) 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 C…

Financial engineers are quite talented in figuring out ways to create things that look like a duck, swim like a duck, and quack like a duck, but definitely are not ducks in a regulatory sense.

And I am not familiar with Californian regulations, but I think there may be some challenges in trying to enforce the regulations if a californian makes a bitcoin deposit to a remote chinese "bank"?

Re: Do We Need Central Banks? (2017)

#74

Post by badminton1 »

a008t wrote: post #64
badminton1 wrote: post #37

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…

I think the question of what is the optimum human population of a country, continent, planet that maximizes prosperity and welfare is an interesting one. Yet, apart from the problem of humans still having to be in actual close physical proximity to each other for economic activity, which results in housing problems in major cities, I do not see the signs of overpopulation or too much economic activity in Western coun…

No, ecology is not getting better. If you haven't noticed you are in the middle of an extinction event.

Re: Do We Need Central Banks? (2017)

#75

Post by brian_cloutier »

beefield wrote: post #68
brian_cloutier wrote: post #62

Earlier quoted context omitted.

Okay, I'm not a banker so there's a good chance I'm the one who's wrong, and I bet the answer changes depending on the specific transaction. > 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 We completely agree on this part. > When I pay coffee shop with a debit cards, exactly what ha…

> But I'm currently visiting Turkey, and when I swipe my card Chase definitely does not "owe the coffee shop a bit more", Chase has absolutely no relationship with the Turkish coffee shop I'm sitting in. Admittably I made some shortcuts. Obviously chase does not likely have a relationship with that Turkish coffee shop, but it does have a relationship (which may be complex, involving visa, mastercard etc.) with the ba…

Okay, I've done some more research and I'm much less sure than I previously was. I mean, I'm now pretty sure you're right: at the time of the transaction the only thing which is transferred is an IOU.

It still seems to me, however, that at the end of the day there's a net settlement process which happens at the central bank and moves real central bank money between the banks as a result of your transaction. (I'm can't figure out what the international equivalent is but assume there is one)

Do you have any links I could read which say otherwise?

> At the end of the day, most of the time the customer payments should not have a systematic drift (if there were, it would be called bank run)

I don't think this would constitute a run, I think it just results in the banks shipping central bank money to each other to settle the difference.

I'm finding it surprisingly difficult to Google this, would love any pointers you can give.

Re: Do We Need Central Banks? (2017)

#76

Post by dogma1138 »

brian_cloutier wrote: post #25
dogma1138 wrote: post #15

Earlier quoted context omitted.

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 starti…

Ofc it has to support it you can’t loan more bitcoins than you have unless you use some other tools like say options by even that isn’t straight forward unless you have a clear secondary settlement process.

If you want to do fractional reserve in say crypto you need to have a blockchain where the “bank” can print crypto like they do with current currency until then it’s off the books accountign or a ponzy scheme like MtGox.

Re: Do We Need Central Banks? (2017)

#77

Post by dogma1138 »

pjc50 wrote: post #33
dogma1138 wrote: post #4

Earlier quoted context omitted.

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…

Ofc they can’t which is why I said that the crypto needs to support it for it to work properly otherwise the only thing you are left with is some odd options based scheme or a MtGox type ponzy racket.

Re: Do We Need Central Banks? (2017)

#78

Post by dogma1138 »

sonnyblarney wrote: post #34
dogma1138 wrote: post #4

Earlier quoted context omitted.

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 is a cosensus protocol that can be used to propose and approve a change the crypto, this is no more difficult than changing a monetary policy it’s just different. The code changes isn’t the hard part the policy itself is.

Re: Do We Need Central Banks? (2017)

#79

Post by mendelsd »

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)

I suspect most researchers fear that mining this particular vein would be career suicide. Prof Werner seems likely, based on his bio, to have made a lot of money in the financial industry - he can probably afford not to give a damn.

Re: Do We Need Central Banks? (2017)

#80

Post by soVeryTired »

beefield wrote: post #71
soVeryTired wrote: post #60

Earlier quoted context omitted.

Fractional reserve banking doesn't exist anymore. Banks lend against their loss-absorbing capital, not their reserves. Reserves are just used for inter-bank settlement. 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...

Coppola (and most other people claiming to "reveal" something profound of financial system when they tell that banks do technically not lend deposits forward) is confused in my humble opinion. There is no need for double entry accounting trickery nor loans to create money. All bank needs to do is to say that they owe me money and they have created money at that very moment.[1] Simple as that. And they do create money…

Where are you getting this information from? Surely interest on deposits is accounted for as a funding cost and is paid out of the bank's revenues (same for staff costs).

I don't know why you're calling double accounting "trickery". It's literally the way a bank operates. I mean, it's enshrined in law for god's sake. A public company has to publish accounts every year, and the double-entry analysis you see in most discussions of money creation shows where assets are entered on the balance sheet.

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