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Do We Need Central Banks? (2017)

professorwerner.org

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Re: Do We Need Central Banks? (2017)

#121

Post by brian_cloutier »

dogma1138 wrote: post #106
brian_cloutier wrote: post #85

Earlier quoted context omitted.

> 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 Bit…

That’s not a fractional reserve since that one needs to be in the same unit of account if you are using two units of account that’s not a fractional reserve that is an exchange rate. If you loan less than your total then again it’s not fractional lending it’s simply lending.

Okay, I'm not sure I should answer because it's starting to seem like you're trolling. Giving you the benefit of the doubt:

> if you are using two units of account that’s not a fractional reserve

The system I described only has one unit of account, Bitcoin. It doesn't matter whether they're on-chain or "virtual", they're both Bitcoin, and are worth the exact same amount.

> If you loan less than your total then again it’s not fractional lending it’s simply lending.

You have misunderstood fractional reserve banking. Banks are not allowed to give out more money than they have received in deposits. Here's Wikipedia:

> Fractional-reserve banking is the practice whereby a bank accepts deposits, makes loans or investments, but is required to hold reserves equal to only a fraction of its deposit liabilities.

Say the reserve ratio is 10%. Then, given $100, the bank is allowed to give out $90 and must keep $10 on hand.

Re: Do We Need Central Banks? (2017)

#122

Post by philipwhiuk »

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…

None of this is affected, solved or improved by changing to Bitcoin.

Your comment is complete off topic.

Re: Do We Need Central Banks? (2017)

#123

Post by EGreg »

throwawayjava wrote: post #119
EGreg wrote: post #105

Earlier quoted context omitted.

Suppose all the sovereign debt defaults and is restructured to be 5% of the original. Who loses? Mostly the holders of treasuries. Holders of other assets would seem to be fine! So it seems to me to be like any other default, except on a larger scale. Price the sovereign debt risk into the calculation and diversify into real assets.

> Who loses? Mostly the holders of treasuries. In the United States, defaulting on Sovereign Debt would basically guarantee the death of social security. If you're in the USA, by far the best way you can insulate yourself against sovereign debt is by: 1) organizing your life's expenses so that you can retire (or at least continue to live) with $0.00 from social security. 2) Ensuring that you don't rely on any federal…

Why can’t these funds including the social security funds diversify into real assets ahead of a default?

Re: Do We Need Central Banks? (2017)

#124

Post by osrec »

EGreg wrote: post #105
osrec wrote: post #70

Earlier quoted context omitted.

Yes, the last paragraph is pretty much the system every country uses. Look at the UK, for example, where the national debt continues to rise - there is no real plan to pay it off - the system is designed in such a way that overall debt issuance must rise in order to service older debt. It's a horribly unstable system, but unfortunately we seem to have embraced it across the world.

Suppose all the sovereign debt defaults and is restructured to be 5% of the original. Who loses? Mostly the holders of treasuries. Holders of other assets would seem to be fine! So it seems to me to be like any other default, except on a larger scale. Price the sovereign debt risk into the calculation and diversify into real assets.

The problem is that a sovereign default increases the cost of capital for pretty much everyone in a nation. This generally results in a decrease in lending, and kills any markets that are dependent on lending (housing being a big one).

Basically, once the bankers have inflated financial bubbles everywhere, the impending crash is bad for the common man, UNLESS you're one of the lucky individuals that somehow became cash rich during the bubble, and can use the cash to buy up while the market/lending falls to pieces. Funnily enough, the cash rich ones seem to be the bankers, who, laden with bonuses from the bubble days, buy up property which they can rent to plebs to get a comfortable 6-10% pa return.

A great system, isn't it?!

Re: Do We Need Central Banks? (2017)

#125

Post by mkirklions »

a008t wrote: post #66
erikb wrote: post #61

I'm surprised that the obvious isn't mentioned even by the "opponents" of the current banking system. What increases the risk is that banks create investments without safety backups and what destroys economic growth is the huge bonuses they take out of these investments. Maybe it's because I played poker in the past that I can intuitively see it? In poker usually players play against each other in a zero sum game. Th…

That last paragraph sounds suspiciously close to what most governments with a sovereign currency are doing.

This is why I'm surprised government lets Bitcoin exist.

Re: Do We Need Central Banks? (2017)

#126

Post by JohnJamesRambo »

emodendroket wrote: post #94
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…

So far there does not seem to be any serious threat to any national currency because of cryptocurrency.

What???

https://www.cnbc.com/2017/08/30/venezuela-is-one-of-the-worl...

https://www.bloomberg.com/news/articles/2017-11-15/bitcoin-s...

Re: Do We Need Central Banks? (2017)

#127

Post by brian_cloutier »

philipwhiuk wrote: post #115
brian_cloutier wrote: post #27

Earlier quoted context omitted.

I don't think you understand what I was trying to say. I'm well aware that they create money, but they're literally not printing dollars. They do not cause M0 to increase. Nobody but the Treasury can cause physical dollars to be created, but that doesn't prevent fractional reserve from occurring. So, anybody who claims Bitcoin doesn't support fraction reserve based solely on the fact that banks can't create new Bitco…

Okay. I'm Chase Bank. How do I issue 600 BTC given I have 20 BTC in my account. There is zero allowance in the protocol for this to happen.

Say the reserve requirement is 10%. Wikipedia states [1]:

> The minimum reserve is generally determined by the central bank to be no less than a specified percentage of the amount of deposit liabilities the commercial bank owes to its customers.

If someone gives Chase $100, Chase is allowed to loan out up to $90 of it, and must keep the remaining $10 in reserve.

1: https://en.wikipedia.org/wiki/Reserve_requirement

The protocol allows someone with 100BTC to send someone else 90BTC.

Re: Do We Need Central Banks? (2017)

#128

Post by a008t »

EGreg wrote: post #105
osrec wrote: post #70

Earlier quoted context omitted.

Yes, the last paragraph is pretty much the system every country uses. Look at the UK, for example, where the national debt continues to rise - there is no real plan to pay it off - the system is designed in such a way that overall debt issuance must rise in order to service older debt. It's a horribly unstable system, but unfortunately we seem to have embraced it across the world.

Suppose all the sovereign debt defaults and is restructured to be 5% of the original. Who loses? Mostly the holders of treasuries. Holders of other assets would seem to be fine! So it seems to me to be like any other default, except on a larger scale. Price the sovereign debt risk into the calculation and diversify into real assets.

The problem with sovereign debt is that it is likely to be inflated away instead of getting restructured. As a result, all lenders lose, borrowers win, all holders of risky assets lose as risk premiums go up. To make things worse, inflation makes its way through the economy unevenly, distorting prices and leading to misallocations of resources.

As a result, real wealth is destroyed.

Re: Do We Need Central Banks? (2017)

#129

Post by emodendroket »

JohnJamesRambo wrote: post #126
emodendroket wrote: post #94

Earlier quoted context omitted.

So far there does not seem to be any serious threat to any national currency because of cryptocurrency.

What??? https://www.cnbc.com/2017/08/30/venezuela-is-one-of-the-worl... https://www.bloomberg.com/news/articles/2017-11-15/bitcoin-s...

At best you can say that people become interested in the same sort of circumstances they're they're interested in conducting transactions in foreign reserve currencies rather than their own.

Re: Do We Need Central Banks? (2017)

#130

Post by mkirklions »

osrec wrote: post #70
a008t wrote: post #66

Earlier quoted context omitted.

That last paragraph sounds suspiciously close to what most governments with a sovereign currency are doing.

Yes, the last paragraph is pretty much the system every country uses. Look at the UK, for example, where the national debt continues to rise - there is no real plan to pay it off - the system is designed in such a way that overall debt issuance must rise in order to service older debt. It's a horribly unstable system, but unfortunately we seem to have embraced it across the world.

I'm not a fan of central banks, but I understand why this exists constantly in the world.

Government seems to be the group that controls the military.

In desperate times, the government will print more money to pay for the military.

If they lose the war/freedom, the new government will erase the value of the old money and write their own.

Government printing money seems to be necessary for the own survival, good or bad.

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