does anyone know how will banks and accounts work in such a system ? because funds will be held by individuals and not banks.
will banks become the authoritative proof-of-stake entities ?
Central bank cryptocurrencies
21–30 of 51 posts
Re: Central bank cryptocurrencies
#22Earlier quoted context omitted.
The banks are in debt to trillions of dollars to people who are 'in credit'. That's what 'in credit' means. It is the accounting term for a liability. Does that keep you awake at night too? For every asset there is a liability - even with cryptocurrencies. What you are missing with government 'debt' is that it creates safe private assets that keep the pension system going.
> For every asset there is a liability - even with cryptocurrencies. I would think that bitcoin is no-ones liability? I mean, there are a bunch of bitcoins that you may or may not be able to sell someone with a price, but there is no-one who has any kind of legal or even moral obligation to give you anything in exchange of a bitcoin.
Liability will start once you start loaning them out to others and package the loans to other investors who them show them as assets to borrow something from someone else :).
Re: Central bank cryptocurrencies
#23Earlier quoted context omitted.
He didn't win a Nobel Prize. Neither did he come up with anything that actually passes muster. Getting a chocolate medal from your mates in the same club doesn't qualify as credentials.
> Hayek shared the 1974 Nobel Memorial Prize in Economic Sciences with Gunnar Myrdal for his "pioneering work in the theory of money and economic fluctuations and ... penetrating analysis of the interdependence of economic, social and institutional phenomena." https://en.wikipedia.org/wiki/Friedrich_Hayek
I suspect that rather than quibbling on the historical facts of the prizes award, the person you're responding to doesn't consider the Swedish National Bank's Prize in Economic Sciences in Memory of Alfred Nobel to be a genuine Nobel Prize.
Re: Central bank cryptocurrencies
#24Earlier quoted context omitted.
> For every asset there is a liability - even with cryptocurrencies. I would think that bitcoin is no-ones liability? I mean, there are a bunch of bitcoins that you may or may not be able to sell someone with a price, but there is no-one who has any kind of legal or even moral obligation to give you anything in exchange of a bitcoin.
Liability will start once you start loaning them out to others and package the loans to other investors who them show them as assets to borrow something from someone else :).
Sure. But it is not the bitcoin that is the liability, it is the loan contract.
Re: Central bank cryptocurrencies
#25Earlier quoted context omitted.
Deflationary currencies are hoarded, not spent in circulation. Even Aristophanes described it thousands of years ago. That's what advocates of "sound money" need to understand. Sound money is good, but for savings. On top of this you build other, less sound money, which circulates. This is also known as "Gresham's Law".
Nobel prize winner F.A Hayek wrote a great defense of deflationary currency and a rebuttal to Keynes back when he was debating Keynes in the 30s[1]. He also predicted Bitcoin with his book "The Denationalization of Money" written in the 1970s[2]. [1] https://mises.org/library/hayek-paradox-saving [2] https://mises.org/library/denationalisation-money-argument-r...
Hayek didn't really adequately defend a deflationary currency at all. Hayek was attacking a related, but different underconsumptionist argument that consumption was more important than investment.
The argument against [sustained] deflation is that investment will be reduced along with consumption. In order for investment to take place, it is necessary [though not sufficient] for the investor to expect to earn a money profit as a result. In the case of sustained deflation resulting from an economy being tied to a fixed supply of money, the expected money return on an average investment over a time period is negative (especially after adjusting for risk) and the expected real return to burying money in the garden is positive. Thus the money stock is more likely to be buried in the garden and less likely to be invested in production, with the result that less stuff is produced and sold than otherwise could have been.
The best thing that can be said about Hayek's argument as a defence of this is that he points out that profitable companies confident of still having a market in future might still be inclined to invest money in cutting production costs (which is true, and necessary for the deflation to be sustained, otherwise you can expect prices of goods to start rising again in future as a result of greatly reduced production) but there's no reason to expect that level of investment to not be lower than an economy where nobody is incentivised to hoard.
(the original paper is included in this compendium for those interested http://www.hayek.sk/wp-content/uploads/2012/12/hayekcollecti...)
Re: Central bank cryptocurrencies
#26Lol. So back crypto $ with trillions of $ of debt going back to the Louisiana purchase; kept alive by a pyramid scheme dependant on a certain and limitless supply of debt free immigrants, after they continue to prove they don't require anything concrete to generate demand & subsequently value? Aka: how interested are people in a cryptocurrency worth market value minus 20 trillion $?
The banks are in debt to trillions of dollars to people who are 'in credit'. That's what 'in credit' means. It is the accounting term for a liability. Does that keep you awake at night too? For every asset there is a liability - even with cryptocurrencies. What you are missing with government 'debt' is that it creates safe private assets that keep the pension system going.
If I understand your argument, you're saying that I'm a 'creditor' to my bank when I deposit money there that they are obliged to return on demand. Fair enough, but the reason I deal with banks is that it's cheaper than protecting my assets personally. Cryptocurrency is cheaper than dealing with the banks.
So if I find a dollar on the beach and pick it up, what liability has been created by my having a new asset? Are you saying that the potential to find the dollar was some sort of collective asset that I've turned into a liability? That seems like an unnecessarily complicated way of looking at things.
The only thing that can keep the pension system going is a growing population paying into it. Pensions are the ultimate pyramid scheme, the idea that bonds are a safe private asset... safe compared to what, and how safe on an absolute basis?
Re: Central bank cryptocurrencies
#27I welcome it. It will make the flow of fiat into good cryptocurrencies so much easier. Let the better system win. Monopolies are almost never good.
Re: Central bank cryptocurrencies
#28I'm my country twice until now, the government remained without money, and started printing like crazy, people's cash economies, were melted, or course people would say, that real estate, gold, stocks, but I'm not talking here about so much money, I'm talking about 6 months living expenses for example, bitcoin would have been a great use for this kind of savings, we don't have stocks here, gold is impossible to buy, and no safe to store, etc. If think about there isn't a lot of difference between gold and bitcoin, the main thing is immutability, gold industrial use is a myth.
Re: Central bank cryptocurrencies
#29Lol. So back crypto $ with trillions of $ of debt going back to the Louisiana purchase; kept alive by a pyramid scheme dependant on a certain and limitless supply of debt free immigrants, after they continue to prove they don't require anything concrete to generate demand & subsequently value? Aka: how interested are people in a cryptocurrency worth market value minus 20 trillion $?
Alternate framing: let's back crypto with payment obligations tied to the economic output of the world's richest economy rather than backing it by optimism.
Ultimately I'd have much more confidence in a cryptocurrency backed by enforceable [probably private IRL] debt obligations than one which wasn't.
Re: Central bank cryptocurrencies
#30Very interesting. I'm intrigued by Fedcoin and how it incorporates the possibility of monetary policy into the cryptocurrency framework. The rigidity and hard ceiling on liquidity of Bitcoin is a major weakness of the currency (I know that Bitcoin enthusiasts see it as a strength) but if technology like Fedcoin can overcome that weakness I'm more bullish about cryptocurrency becoming part of the monetary scheme.
Bitcoin might be rigid, but that is solved by having lots of cryptocurrencies. Which then sort of defeats the 'hard money' nonsense theories behind its construction. Similarly with Gold. Once Gold gets to a point people start hoarding elements with other atomic numbers.
Exactly, cryptocurrency isn't digital gold, it's the system of privately-issued competing currencies advocated by Hayek.