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Bitcoin Failed in El Salvador. The President Says the Answer Is More Bitcoin

foreignpolicy.com

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Re: Bitcoin Failed in El Salvador. The President Says the Answer Is More Bitcoin

#251

Post by lowkey »

Thiez wrote: post #236
md_ wrote: post #235

Earlier quoted context omitted.

“If it were not for central bankers printing money into existence, a person could work their life, save a portion for retirement in a bank account or other fixed income product, while enjoying a positive return on their investment, without taking on market risk of loss of funds.” Hmm. How would that work?

Yes, it's very mysterious. If everybody put their money in the bank they would all be guaranteed a positive return on their investment, but there is no inflation and the money supply is fixed. So where does the money come from?

It’s simple really. In finance this is called ‘the time value of money.’ Essentially, in order for me to be incentivized to use a savings vehicle, there must be a real incentive. This incentive is what motivates the saver to save. If not for the incentive, why would they lend their money out?

Re: Bitcoin Failed in El Salvador. The President Says the Answer Is More Bitcoin

#252

Post by throw0101a »

lowkey wrote: post #245
throw0101a wrote: post #241

Earlier quoted context omitted.

> except if you read the * and footnote …it says: > These restrictions on gold exports continued until June 1919, at which point we returned to the full gold standard. I have started from this last date, because there is no question that we were operating under the gold standard at this point. So the gyrations were occurring when the gold standard was full-on. See also: * https://www.vox.com/2014/7/16/5900297/case-ag…

I can see you subscribe to modern monetary theory and believe that central bankers and their ability to freely print money without limit are essential to a functioning modern economy. Further, I see that you don’t share my concerns about increasing inflation. In your eyes, if economists can predict inflation we don’t actually need to prevent or stop inflation. In my mind inflation is theft by central powers, stealing…

> I can see you subscribe to modern monetary theory

Nope. I generally lean more towards Krugman (whose not too hot on MMT):

* https://www.nytimes.com/2019/02/25/opinion/running-on-mmt-wo...

> Further, I see that you don’t share my concerns about increasing inflation.

I've been hearing people yammer on about inflation for a while now (at least 2009). The constant droning on about it is becoming like background tinnitus. It's not that it doesn't matter when it gets "too high", but given the modern secular stagnation we've been seeing in the developed world, little growth and deflation seems like a higher probability. Japan has had a bank rate of > In your eyes, if economists can predict inflation we don’t actually need to prevent or stop inflation.

In my eyes economists see inflation in the context of the time that is (or is not) occurring. They can work towards preventing it, stopping it, encouraging it, or letting it run for a while depending on the situation.

Annualized inflation was -0.36 in 2009, was that a good thing?

* https://fred.stlouisfed.org/series/FPCPITOTLZGUSA

If they can predict inflation then it implies they have a decent understanding of what various policies are doing / will do. It allows them to tailor those policies towards various objectives: the current objective could be that they want to get people employed again, and as the unemployment number decreases (or the participation rate increases) they can scale back the program(s). At least in the US, remember that the central bank has a dual mandate:

* https://twitter.com/ritholtz/status/1468924345703706631

> In my mind inflation is theft by central powers, stealing the most from those with the least leverage (aka the poor and middle class).

Contra:

> Inflation redistributes from creditors to debtors — not exactly a burden on the bottom half of the income distribution 2/

* https://twitter.com/paulkrugman/status/1469728251643838467

A good portion of people have debt, the largest portion of which is often their mortgage.

> A 2% annual rate of inflation over a 40 year career will steal 40% of the purchasing power of the wage-earner.

Assuming that wages don't rise. Fight for inflation-indexed minimum wage (at state and federal levels), and fight for unions. Having 0 or negative inflation (deflation) is worse from the reading I've done (see 1930s).

> We are currently experiencing 6.4% inflation based on official data.

And we'll see what it is over the next year. I'll go with the prediction of a spike over the course of 12-18 months (probably ending late-2022):

* https://www.piie.com/blogs/realtime-economic-issues-watch/in...

Re: Bitcoin Failed in El Salvador. The President Says the Answer Is More Bitcoin

#253

Post by [deleted] »

lowkey wrote: post #247
md_ wrote: post #246

Earlier quoted context omitted.

OK. And what if the borrower defaults? Per https://docs.anchorprotocol.com/protocol/money-market#borrow... , it seems like there'd be zero risk as long as the LTV is >= 1.0, but that sort of defeats the point of loans. ;)

There is no magic to make these loans riskless. These are OVER-collateralized loans. Like any other collateral backed loan, if the value of the collateral falls to a point where there may be a risk of the collateral value being less than the loan amount, then the borrower must either put up more collateral or their existing collateral is liquidated to pay off the loan, leaving no outstanding balance. It’s not really…

[deleted]

Re: Bitcoin Failed in El Salvador. The President Says the Answer Is More Bitcoin

#254

Post by md_ »

lowkey wrote: post #247
md_ wrote: post #246

Earlier quoted context omitted.

OK. And what if the borrower defaults? Per https://docs.anchorprotocol.com/protocol/money-market#borrow... , it seems like there'd be zero risk as long as the LTV is >= 1.0, but that sort of defeats the point of loans. ;)

There is no magic to make these loans riskless. These are OVER-collateralized loans. Like any other collateral backed loan, if the value of the collateral falls to a point where there may be a risk of the collateral value being less than the loan amount, then the borrower must either put up more collateral or their existing collateral is liquidated to pay off the loan, leaving no outstanding balance. It’s not really…

I’ll happily lend you $1 if you deposit $2 in collateral first. :)

However, I suspect the market for such loans is rather small.

Re: Bitcoin Failed in El Salvador. The President Says the Answer Is More Bitcoin

#255

Post by lowkey »

throw0101a wrote: post #252
lowkey wrote: post #245

Earlier quoted context omitted.

I can see you subscribe to modern monetary theory and believe that central bankers and their ability to freely print money without limit are essential to a functioning modern economy. Further, I see that you don’t share my concerns about increasing inflation. In your eyes, if economists can predict inflation we don’t actually need to prevent or stop inflation. In my mind inflation is theft by central powers, stealing…

> I can see you subscribe to modern monetary theory Nope. I generally lean more towards Krugman (whose not too hot on MMT): * https://www.nytimes.com/2019/02/25/opinion/running-on-mmt-wo... > Further, I see that you don’t share my concerns about increasing inflation. I've been hearing people yammer on about inflation for a while now (at least 2009). The constant droning on about it is becoming like background tinnitu…

The Krugman article you linked is behind a paywall so I couldn’t read it. I did, however find this other article on his take on MMM [1]. Per the article, Krugman’s take is that most other economists aren’t pro-MMM enough for his taste. He thinks we should be even further to the left on MMM. Is that your position also?

Do you also support Krugman’s position that the internet would never be more valuable to society than the fax machine? [2] I have no doubt you concur with his repeatedly articulated position that Bitcoin is also worthless? Perhaps as worthless as the internet vs the illustrious fax machine?

As for the rest of your comments, I’ll summarize them as follows:

1. Inflation is not a problem as long as economists can predict it because, reasons.

2. Inflation isn’t really a problem for regular people because they can just go and get an over-sized mortgage at an interest rate below inflation and get free money without consequence.

3. Inflation will be over soon, which ignores the trillions in new money recently injected into the economy, and people maybe won’t notice or won’t mind the new higher prices for things as prices magically stabilize in 12-18 months? - despite the fact that the money printer isn’t likely to stop printing money in that timeframe.

[1] https://www.businessinsider.com/paul-krugman-modern-monetary...

[2] https://www.businessinsider.com/paul-krugman-responds-to-int...

Re: Bitcoin Failed in El Salvador. The President Says the Answer Is More Bitcoin

#256

Post by lowkey »

md_ wrote: post #246
lowkey wrote: post #244

Earlier quoted context omitted.

Similar to other stablecoins, over-collateralized lending against the value of staked crypto assets. See here for details on UST (Anchor protocol) https://www.anchorprotocol.com/docs/anchor-v1.1.pdf

OK. And what if the borrower defaults? Per https://docs.anchorprotocol.com/protocol/money-market#borrow... , it seems like there'd be zero risk as long as the LTV is >= 1.0, but that sort of defeats the point of loans. ;)

> it seems like there'd be zero risk as long as the LTV is >= 1.0, but that sort of defeats the point of loans. ;)

Help me see what I am missing, what is the point of loans that is defeated by requiring an LTV >= 1.0?

To my knowledge all collateral backed lending is based on the principal that the collateral value must always be greater than the value of the loan in order to remain solvent. Since crypto is a volatile asset, you would expect lenders to require higher relative LTV than vs real-estate, which for the most part they do.

Re: Bitcoin Failed in El Salvador. The President Says the Answer Is More Bitcoin

#257

Post by rnduser1234 »

md_ wrote: post #254
lowkey wrote: post #247

Earlier quoted context omitted.

There is no magic to make these loans riskless. These are OVER-collateralized loans. Like any other collateral backed loan, if the value of the collateral falls to a point where there may be a risk of the collateral value being less than the loan amount, then the borrower must either put up more collateral or their existing collateral is liquidated to pay off the loan, leaving no outstanding balance. It’s not really…

I’ll happily lend you $1 if you deposit $2 in collateral first. :) However, I suspect the market for such loans is rather small.

Defipulse.com click on lending... says the market is currently the $47 billion

Re: Bitcoin Failed in El Salvador. The President Says the Answer Is More Bitcoin

#258

Post by davidgerard »

md_ wrote: post #254
lowkey wrote: post #247

Earlier quoted context omitted.

There is no magic to make these loans riskless. These are OVER-collateralized loans. Like any other collateral backed loan, if the value of the collateral falls to a point where there may be a risk of the collateral value being less than the loan amount, then the borrower must either put up more collateral or their existing collateral is liquidated to pay off the loan, leaving no outstanding balance. It’s not really…

I’ll happily lend you $1 if you deposit $2 in collateral first. :) However, I suspect the market for such loans is rather small.

one of the common moves is borrowing ETH using an illiquid otherwise-unsaleable shitcoin as collateral. Oh no, you defaulted, and you've lost your shitcoins for half their alleged face value in highly liquid ETH! Oh well.

Re: Bitcoin Failed in El Salvador. The President Says the Answer Is More Bitcoin

#259

Post by lowkey »

md_ wrote: post #254
lowkey wrote: post #247

Earlier quoted context omitted.

There is no magic to make these loans riskless. These are OVER-collateralized loans. Like any other collateral backed loan, if the value of the collateral falls to a point where there may be a risk of the collateral value being less than the loan amount, then the borrower must either put up more collateral or their existing collateral is liquidated to pay off the loan, leaving no outstanding balance. It’s not really…

I’ll happily lend you $1 if you deposit $2 in collateral first. :) However, I suspect the market for such loans is rather small.

It’s more like I will lend you $1 if you post >$1 in collateral. In crypto, this is often in the form of a speculative token that is growing at potentially 200+% per year. The borrower is posting their collateral as security for the loan but they continue to own the collateral and enjoy the upside of price appreciation as long as the loan is in good standing.

As the sister comment pointed out, it is currently a $50 Billion industry and it didn’t exist a couple years ago. In fact, DeFi is probably the fastest growing industry in the history of fast growing industries. You would be wise to have a curious mind in this field instead of being closed to the possibilities.

Re: Bitcoin Failed in El Salvador. The President Says the Answer Is More Bitcoin

#260

Post by md_ »

lowkey wrote: post #259
md_ wrote: post #254

Earlier quoted context omitted.

I’ll happily lend you $1 if you deposit $2 in collateral first. :) However, I suspect the market for such loans is rather small.

It’s more like I will lend you $1 if you post >$1 in collateral. In crypto, this is often in the form of a speculative token that is growing at potentially 200+% per year. The borrower is posting their collateral as security for the loan but they continue to own the collateral and enjoy the upside of price appreciation as long as the loan is in good standing. As the sister comment pointed out, it is currently a $50 B…

I'm aware of this. But again, your original claim was “If it were not for central bankers printing money into existence, a person could work their life, save a portion for retirement in a bank account or other fixed income product, while enjoying a positive return on their investment, without taking on market risk of loss of funds.”

I've yet to understand where you got that idea from, or what it has to do with all of your nonsensical followup comments.

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