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Do We Need Central Banks? (2017)

professorwerner.org

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Re: Do We Need Central Banks? (2017)

#81

Post by notahacker »

aaronhoffman wrote: post #72

What free banking might look like http://www.learnliberty.org/videos/what-free-banking-and-why...

What free banking actually looked like: https://www.frbatlanta.org/-/media/documents/filelegacydocs/...

TLDR: Banks regularly collapsed and not just because of fraud, but started to collapse less as they got regulated more. The system functioned (for certain values of "functioned"), but shockingly enough the man on the street did not turn out to be better at evaluating a bank's solvency than central banks. They were of course also less able to bail themselves out if they misjudged a bank's solvency.

Re: Do We Need Central Banks? (2017)

#82

Post by mendelsd »

notahacker wrote: post #55
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)

Weirdly, some of the organizations and theories he's attacking are also his own (he was the lead author on the [weak] Positive Money paper which proposed making the Bank of England directly control the money supply he's now insinuating is some central banker astroturfing campaign, and the unconventional recommendation central banks broaden their remit to tackle Japanese economic stagnation by taking on some of the as…

Weirdly, you haven't addressed the ideas expressed in the article in any substantive way.

Re: Do We Need Central Banks? (2017)

#83

Post by beefield »

soVeryTired wrote: post #80
beefield wrote: post #71

Earlier quoted context omitted.

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 di…

> Where are you getting this information from?

Mainly my own personal thinking. No other sources.

> Surely interest on deposits is accounted for as a funding cost and is paid out of the bank's revenues (same for staff costs).

Of course. But before those are paid, they do not (need to) exist anywhere (but in the profit account if you want to take an accounting view)

> I don't know why you're calling double accounting "trickery".

Because that's what these people claim that double entry accounting is some magic wand that is needed to create money. You could operate a bank without double entry accounting that would not change the economics of the bank operations anyhow. You do not need to have double entry accounting to make a loan nor write an IOU. I Can write you an IOU that says that beefield will pay 10 bucks to the holder of this paper and you could use that as a money to buy stuff at least from me and my mom. Not sure if anyone else would trust that... No lending, no double entry accounting needed.

Re: Do We Need Central Banks? (2017)

#84

Post by chiaro »

mendelsd wrote: post #79
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.

This is ridiculous conspiracy theorising.

Re: Do We Need Central Banks? (2017)

#85

Post by brian_cloutier »

dogma1138 wrote: post #76
brian_cloutier wrote: post #25

Earlier quoted context omitted.

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…

> 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.

Okay, I think maybe what we're arguing about is definitions. I'm trying to say, "off the books accounting" is perfectly legitimate fractional reserve. It is not possible to create more on-chain Bitcoin, but something which looks exactly like fractional reserve is possible today and would end up creating "off-chain" Bitcoins, increasing the Bitcoin money supply without increasing the number of on-chain Bitcoin beyond 21 million.

Maybe you don't think that such a system should be called Fractional Reserve, I guess that's where we disagree.

> you can’t loan more bitcoins than you have

Fractional reserve isn't about loaning more than you have. In fact, kind of the the entire point is that you must loan less than you have: you loan out at most some fraction of your deposits and reserve the rest.

Re: Do We Need Central Banks? (2017)

#86

Post by chiaro »

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…

Central banking evolved as a series of hotfixes for various macroeconomic edge-cases. Bank runs is one. Wildly varying inflation rates is another.

Re: Do We Need Central Banks? (2017)

#87

Post by sonnyblarney »

dogma1138 wrote: post #78
sonnyblarney wrote: post #34

Earlier quoted context omitted.

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.

"hard part the policy itself is" which is ultimately the point of a 'central bank' really.

Re: Do We Need Central Banks? (2017)

#88

Post by beefield »

brian_cloutier wrote: post #75
beefield wrote: post #68

Earlier quoted context omitted.

> 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'…

> 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

There is a daily settlement process via central bank, but you do not need to settle daily. Imagine only transaction today was me sending 10 bucks to your bank account. Your bank would likely say that hey, pay that 10 bucks (plus interest) some day later when there is a bigger payment coming. And by tomorrow someone from your bank paid to my bank 10 bucks, so then there was no need to do transfers. Banks do run credit lines against each other. Obviously, if I were to send one hundred million bucks, your bank would cough and say that okay, let's see when the money is at our central bank account....

> I don't think this would constitute a run,

If there is a long term systematic and significant outflow of money from a bank, that is definitely a bank run. Banks can't create central bank money, so if my bank needs to send daily money to your bank and is not receiving anything back, it needs to start liquidating some of the assets.

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

Unfortunately I have found very little good information on money, these thoughts are just based on lots of thinking on the fascinating thing called money... Most sources belong to two camps:

1. Basic , naive economics that is saying that money is created when I deposit money and then bank lends it to you so that you have the cash in hand and I have the money in the account so the amount of money is doubled in society

2. The ones who think they are smart and say that hey, that naive theory is false. Actually banks just create money with double accounting wizardy and loans. Or something like that.

The first one fails to capture the technical details of money creation and the second ones fails to capture the economics.

Re: Do We Need Central Banks? (2017)

#89

Post by a008t »

notahacker wrote: post #81
aaronhoffman wrote: post #72

What free banking might look like http://www.learnliberty.org/videos/what-free-banking-and-why...

What free banking actually looked like: https://www.frbatlanta.org/-/media/documents/filelegacydocs/... TLDR: Banks regularly collapsed and not just because of fraud, but started to collapse less as they got regulated more. The system functioned (for certain values of "functioned"), but shockingly enough the man on the street did not turn out to be better at evaluating a bank's solvency than central banks. They were…

If you consider fractional reserve banking as fraud (banks should only be allowed to lend out funds that you have lent to the bank for a period of time, not funds that you are merely storing in your checking account; a bank run in this context is when account holders want to withdraw their money and it is not there), the system should be fairly stable without a "lender of last resort".

I don't really see why fractional reserve banking is necessary.

Re: Do We Need Central Banks? (2017)

#90

Post by Frondo »

yasp wrote: post #3

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

Okay, but when?

I ask because I've seen this claim made about Austrian economics lots and lots, but haven't seen anything telling a consistent story -- just a lot of "it's coming, keep waiting".

Seriously interested in seeing these claims either supported by a real world narrative.

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