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Calling All Hackers: How money works (2024)

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Re: Calling All Hackers: How money works (2024)

#31

Post by mothballed »

littlestymaar wrote: post #25
Imustaskforhelp wrote: post #10

Earlier quoted context omitted.

I recently discovered narrow banking ( https://www.narrowbanking.org/ ) which basically states the idea of narrow banking which can only make it so that the bank doesn't have the issues with fractional reserve banking if you are worried about it Stablecoins feel the most practical way I suppose for narrow banking although there is this UK bank and this Danish bank as well which are the two examples of narrow banking.…

> here already are some gold pegged stablecoins Something backed by a volatile asset isn't, by definition , a stablecoin, though.

On a long timescale gold is way more stable than the dollar. Dollar is nonvolatile on a long timescale in the sense the expected returns are negative and it does it reliably at usually anywhere from a return around negative 2-10%. But in terms of price stability gold would be far far far far more stable on anything but the most short-sighted of timescales.

Re: Calling All Hackers: How money works (2024)

#32

Post by 0manrho »

willparks wrote: post #5

> A common lament among founders, even successful ones, is: "Sometimes I feel like I'm wasting my twenties". Interesting perspective, I feel like I see this much more attributed to someone working on a meaningless problem for a paycheck at a large company. I guess it speaks to the difficulty in finding purpose in any endeavor in your twenties. Nice conclusion on what to truly value.

> "Sometimes I feel like I'm wasting my twenties".

Is near universal to anyone in their twenties regardless of job type/sector. It's the start of most people's adult life, and without the lack of experience that age brings, it's natural to question if you're on the "right path" and/or be swayed by potential other opportunities you've not yet explored.

Hell, even with the experience of age, people still often ask themselves that very same question, and not just for their twenties either.

Re: Calling All Hackers: How money works (2024)

#34

Post by somewhereoutth »

staplers wrote: post #11
jbs789 wrote: post #8

Earlier quoted context omitted.

This is not correct. For starters, loans are assets. Banks start with some capital, borrow in the form of deposits, and lend in the form of bonds, mortgages etc. The regulatory capital ratio determines how much capital they must hold to support the assets.

Loans are assets -1 = 1 And people wonder why finite natural resources skyrocket in value.

The best way to understand a loan is as the right to a future income stream (principal repayments and interest). The original debtor (the person/entity taking out the loan) establishes the credibility of that future income stream (based on income, expected returns on a project, etc) and sells it to the lender (usually a bank) for cash up front. Thus the loan is an asset on the bank's balance sheet, that is generating returns (assuming all goes to plan). Banks can and usually do sell on that asset to other parties.

Conversely, when you deposit cash to a bank, you are actually creating a liability on the bank's balance sheet - as you might want your money back one day!

Re: Calling All Hackers: How money works (2024)

#35

Post by ggm »

m463 wrote: post #28
nialv7 wrote: post #23

This smells a lot like a hacker thought because they are exceptional in one field (cybersecurity), they therefore are exceptional in all fields. The result is that information presented in this article is very surface-level, and quite biased.

As a much better alternative, I would recommend "debt" by david graeber, which is amazing.

Graeber is controversial. Archeologists hate how he argues by ad hominem and does not appear to understand the works he cites, to make his argument.

I can't speak to his work on finance as a whole. Regarding deep time, his claims about pre-literate society from archeology are not widely supported, they use thin evidence to argue badly.

His anarcho-socialism isn't the concern. It's his lack of historicity, and inability to bring his peers with him on radical ideas which concerns me.

He's dead, he can't defend himself. So there's that.

Re: Calling All Hackers: How money works (2024)

#36

Post by Imustaskforhelp »

mothballed wrote: post #29
Imustaskforhelp wrote: post #10

Earlier quoted context omitted.

I recently discovered narrow banking ( https://www.narrowbanking.org/ ) which basically states the idea of narrow banking which can only make it so that the bank doesn't have the issues with fractional reserve banking if you are worried about it Stablecoins feel the most practical way I suppose for narrow banking although there is this UK bank and this Danish bank as well which are the two examples of narrow banking.…

Narrow banking was denied a depositor account at the fed IIRC so it's basically DOA as they've envisioned it. IIRC the fed said that narrow banking threatens the stability of the banking system since private credit expansion (and ultimately, the risks that come with that) is in their estimation desirable. Regulators want nothing but to crush the idea.

> IIRC the fed said that narrow banking threatens the stability of the banking system since private credit expansion (and ultimately, the risks that come with that) is in their estimation desirable. Regulators want nothing but to crush the idea.

But why? I don't understand, I feel like certain exceptions like (credit cards?) or house loans can be built or some personal loans but we all see a disaster which will be billed by govt. thus impacting everybody

The govt itself can then buy ETF's once again / invest money from one way or other via pension funds or other funds (sovereign funds?) to the stock markets themselves or other avenues.

banks basically arbitrage the fact that they are FDIC insured and loans. Nothing wrong with it except the fact that most banks would keep most of the money with themselves and only give chump change to average person or even 0%. If that's the case, why isn't there a bank which can just provide 3% treasury funds or similar or (gold?) and then just help the average person.

I saw a lot of points I agreed upon the narrow banking website on and I'd love to discuss more about the harms of narrow banking compared to fractional and why regulators shot it down/just comparing the two of them.

Re: Calling All Hackers: How money works (2024)

#37

Post by dghlsakjg »

mothballed wrote: post #27
dghlsakjg wrote: post #16

Earlier quoted context omitted.

That’s not how banking works. Banks cannot lend “10–100× their assets.” Loans are assets. Deposits are liabilities. What limits lending is capital, not reserves, and leverage is tightly regulated at roughly 10× equity, not 100×. The interest math is wrong too. Banks pay interest on deposits, absorb defaults, cover operating costs, hold capital, and meet liquidity rules. Net margins are about 1–3%, not 50–500%. Fracti…

It can be difficult to figure out whether the theoretical limit is 10x or 100x in my mind because there isn't a reserve ratio federally (well, there is one, but it's zero) , and the other regulations surrounding that aren't so cleanly understood in a neat formula.

Extremely simplified:

When I deposit a dollar, the bank records a $1 deposit liability. If the bank makes a $1 loan, it creates a new $1 deposit for the borrower.

If that dollar is spent and redeposited, deposits increase even though the amount of base money has not. It looks like multiplication, but what’s really happening is that loans and deposits are expanding together on the balance sheet.

The bank is not creating wealth out of nothing. It now has matching assets (loans owed to it) and liabilities (deposits owed to customers), backed by capital that absorbs risk.

With reserve ratios effectively zero, lending is constrained by capital requirements and risk management, not by reserves. Banks cannot recirculate a single dollar endlessly without sufficient capital.

Re: Calling All Hackers: How money works (2024)

#38

Post by dghlsakjg »

deejaaymac wrote: post #33

Unpopular opinion, but I don't think banks should be able to loan out money that's not theirs, and printing money is bad. Gold good, paper bad. But also, gold bad, because clipping. If only there was a solution.

That’s a take!

The modern world would collapse in about a week if banks were not allowed to loan out deposits.

The ability to satisfy needs now and pay for them in the future is why you can have a house, why governments can build infrastructure, etc. That’s the only reason that banks really exist. Keeping your deposit safe for you while providing convenient access via cards, checks and other rails is just a wonderful side effect.

After a few thousand years of civilization we don’t have anything better that could allow you to satisfy current needs with future income. Direct loans are just vendors acting as de facto banks, at much higher risk.

A bank product that doesn’t loan out your deposits is called a safe deposit box. There’s your solution.

Re: Calling All Hackers: How money works (2024)

#39

Post by Brian_K_White »

stong1 wrote: post #22
nerdsniper wrote: post #7

Earlier quoted context omitted.

It's basically a tradeoff between wasting your personal life or wasting your professional life. If you get a job that is truly 9-5 (or maybe even a bit less), it leaves a lot of time for forging friendships and relationships and learning hobbies while you're still young, doing sports, seeing the world. Founders usually feel they're missing out on all or most of these. And some of them probably feel like they don't re…

Well said. To expand on what you wrote, I like to think of there being three components (axes) to activities: fun, value, and meaning. Fun is you enjoy doing it. Playing video games and watching TV is fun. Valuable is it makes money. Importantly, it's what other people are willing to pay you money for, not what you think is important or even good. Meaningful is it's spiritually enriching. These are things you would r…

Very nice framework.

I think there is yet some other thing which has a bit of both your Meaningful and Value. Stuff that you decide you should do not precisely (or maybe precisely and this comment is just not well enough considered) because it's meaningful to you but because you just feel it should be done.

Maybe because you just recognize that someone has to do it and you should at least take your turn if not make it your whole life. Maybe because you want to live in a world where it gets done, even if you live in a society that doesn't provide for it to get done. (no one will pay you or anyone else to do it)

Phrasing these things as meaningful makes it into something someone else can say is simply your choice. If it's important to you, you can do it. And let you shoulder the entire burden for something they absolutely benefit from and should be pitching in their fair share towards in some form or another, if not tax money then time or effort, something.

It is definitely meaningful for some people, the people that are so moved that they actually give their time & energy, but those are people for whom it's actually a large part of their life & identity. I'm not like that. I am not going to volunteer for whole shifts anywhere. I care about a strangers problems intellectually. I care in the sense that I want it dealt with humanely with dignity as if I had the problem myself. I don't care directly and personally, emotionally, unless they are somehow close to me. But I would happily pitch in my fair share if we all were, because it would be small.

It's partially value because we all get value from living in the better world thanks to the various thankless tasks some people perform.

Eh, maybe I'm arguing up the wrong tree and what you expressed already covers this.

I am thinking something like "This thing should get done not because I derive meaning from it.", but really maybe what you're talking about isn't even trying to deny that. The point would still be that I might choose to commit a certain amount of my life capital towards something, because of a certain amount of value and meaning that I, let's say recognize not derive or get, from it.

I'm leaving out fun. You can have fun cooking soup for the homeless. I can not imagine having fun cleaning someone who can't clean themselves and can't pay you to do it.

Re: Calling All Hackers: How money works (2024)

#40

Post by DavidPiper »

ggm wrote: post #35
m463 wrote: post #28

Earlier quoted context omitted.

As a much better alternative, I would recommend "debt" by david graeber, which is amazing.

Graeber is controversial. Archeologists hate how he argues by ad hominem and does not appear to understand the works he cites, to make his argument. I can't speak to his work on finance as a whole. Regarding deep time, his claims about pre-literate society from archeology are not widely supported, they use thin evidence to argue badly. His anarcho-socialism isn't the concern. It's his lack of historicity, and inabili…

Just in case anyone is put off by this comment, I want to second the recommendation of Debt: The First 5000 Years. It's excellent, and it has as a free, chapter-by-chapter audiobook on YouTube.

As for Graeber being controversial: yes, though I vaguely recall "The Dawn of Everything" being (moreso) the trove of interesting historical anthropological hypotheses, rather than "Debt"?

Anyway, it's been a while, but my main point is that I wouldn't let Graeber's controversial-ness stop anyone from reading Debt. If anything, going in with that information makes you think harder about the topics he covers.

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