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Bitcoin Banking and Money Supply
A few bitcoin thoughts (been hurting my mind trying to think of everything before I invest). Please let me know if I’m making a mistake with some of this logic, or if there is more info on it. I’m just thinking out loud here.
Note: All of this is under the assumption that 1. bitcoin stays static at 21 million coins. 2. bitcoin becomes the universal and only currency.
- Loans are almost obsolete. At least those that bare interest, since fractional reserve banking becomes impossible. At least not based on bitcoins.
- Loans can be made, but you would have to literally had over control of your bitcoins to the debtor. This would require either 100% trust or a securing of the loan in some sort of asset. of course this makes banking harder. it also makes entrepreneurship harder because you’d have to have something to leverage or earn complete trust of the lender.
- One of the ways I can think of how loans would work in a 100% BTC world is that your money would net you an actual ownership in whatever it was used for when loaned to strangers.
- Banking can still be possible, bitcoin banks would charge a deposit fee to have multiple back up servers that store your info with near impossible to hack encryption and possibly offline back up of info as well as paper copy of the coding (yes, a little over kill, but it’s security).
- These banks wouldn’t be able to pay you interest unless they were making money from your btc, which is, again, not possible given the fixed number of bitcoins.
- How will money supply expand to keep up with the needs of the public? I understand that the set value of each coin can increase and that bitcoin can be broken down into smaller and smaller denominations, but at a certain point, you reach a limit.
- I know that printing more dollars than there is a need for (beyond production value) creates inflation and that the smarter way is to create smaller denominations and let the value of people’s holdings go down. When you create new money, you must distribute it equally among whoever currently holds the money. If you don’t, then you are robbing holders of that money of value. Bitcoin can be broken down into smaller denominations, but there is a limit. I don’t like the limit because it creates a finality to the money supply.
- If there is a limit on the total money supply, then you are theoretically creating a zero-sum system. Unless alternate currencies are also adopted and help expand the money supply that way.
- I don’t like the implications of a world that only runs on Bitcoin.
- I don’t like Zero-Sum games because it goes against everything free markets try to achieve.
- If no other currency is created and BitCoin becomes the only currency in the world, it will be very valuable, but certain crucial aspect of economics would be difficult if not impossible.
- REPEAT: I don’t like the implications of a world that only runs on Bitcoin.
- There is this uneasy feeling of all money supply being finite. It means that one must lose money in order for someone else to gain money. Again; uneasy feeling.
- Austrians like the gold standard and gold is more or less finite in supply. But we forget that along with the gold standard, money had to be expanded to include other precious metals, like silver and bronze and copper. But also, other substances were considered money, like jewels and such.
- Likewise, bitcoin can not be the only currency in the world if decentralized digital currency is in fact the future. Being limited in supply will give way to complications down the road.
Sorry if these are a bit hard to follow. I tried to give some order to it but these are just random thoughts and concerns about bitcoins going forward.
if anyone has any thoughts to add to it, please let me know why I’m stupid and bitcoin is fantastic.
Edit: Started this on reddit, join in: http://www.reddit.com/r/Bitcoin/comments/1bfuzr/think_out_loud_with_me_bitcoin_banking_and_money/
The U.S. will win the global currency race to the bottom but decimate its economy in the process, economist Peter Schiff said.
With global central banks using currency manipulation to spur growth, capital markets have been awash in talk of what the fallout will be for investing strategies and consumers who may have to bear the weight of inflation.
LongtimeFederal Reservecritic Schiff said the central bank is being forced to prop up an ailing U.S. economy and the only way it can is by weakening the dollar.
“There is a currency war going on,” Schiff said at the Inside ETFs conference presented by Index Universe. “The irony of a currency war which makes it different from other wars is the object is to kill itself. Unfortunately, I think the U.S. is going to win the currency war.”
The CEO of Euro Pacific Capital in New York has been one of the market’s most outspoken supporters of gold as a hedge against inflation specifically and global turmoil in general.
He believes the metal will be a prime beneficiary of the currency war, while consumers will be its main victim.
“Anybody who believes there is no inflation isn’t shopping,” he said.
Government cost-of-living indexes such as theconsumer price indexare a “total fraud. Consumer prices in the U.S. are moving up much faster than indicated by the CPI. It is manipulated. It is deliberately designed to mask inflation, not report it,” he said.
As for U.S. economic prospects, Schiff believes they are gloomy.
Gross domestic productindicated a slight contraction in the fourth quarter, though most economists expect that to change in future revisions and growth to be steady but modest through the year. In the meantime, the European sovereign debt crisis is beginning to return to the news as well, though the stock market hasn’t seemed to mind any of it.
But that could change quickly.
“We’re broke. We owe trillions. Look at our budget deficit, look at the debt to GDP (ratio), the unfunded liabilities,” Schiff said. “If we were in the euro zone they would kick us out.”
For Schiff, such talk, though incendiary, is fairly routine.
He found a good deal of interest at the conference, though, with attendees crowding him after his panel discussion even as some other participants were beginning to catch flights out.
“The Fed knows that the U.S. economy is not recovering,” he said. “It simply is being kept from collapse by artificially low interest rates and quantitative easing. As that support goes, the economy will implode.”
Sometimes the consistent propagation of doom & gloom, especially from a well known and trusted source, causes the doom & gloom to come into fruition.
Even if I didn’t believe the US dollar was ready to collapse, which I do, I’d still bet that it would due to so much talk and preparation of it. The sell-offs will come and the investments will shift and it will all happen very quickly by those that have large sums of capital and the sophisticated machinery to detect and move said capital, leaving the unsophisticated investors at the bottom of the leftover rubble.
My advice to small time players is to get out and never come back in or know how hot of a fire they are playing with.
Today is the end of the Canadian penny.
This is apparently platinum coin week among the economic punditocracy. It is not a moment that should inspire great pride in America, but here we are. Here are some key things to understand about a debate that started as a strange, amusing sideshow and is increasingly front and center in the economic policy debate.
I’ll lay out this econo-pundit’s conclusion upfront: I hate the platinum coin idea. But if there is no resolution of the debt ceiling through the legislative process, I hate some of the alternatives more.
Defaulting on debt obligations or gov’t programs is arguably better than printing money to pay them.
Because all printing money does is set a precedent that we can print more if we don’t come to an agreement. And then more. And more. And then we end up like Zimbabwe.
As Thomas Sargent said: “Inflation is always and everywhere a fiscal phenomenon.” Hyperinflation always comes from countries printing away their problems.
Is THE Coin idea finally dead? or should we continue to live in fear?
Charles de Gaulle, in 1965, predicting the global debt crisis due to the fiat currency of the US.
openourminds-deactivated2013022 asked: simply the point is that this whole fucked up system could be solved by our govt. issuing it's own currency. paying off the fiat debt with fiat currency that the banks didn't EARN - they simply loaned profit into existence with no labor, OFF the backs of real laborers - get rid of the the 2 houses and instill a democracy - but that's not the reality. so we must loosen the FED grip first. how? STOP BORROWING. best way? pay the debt back? how? NOT by austerity. lol. look at the EU.
You are a perfect example of why I barely answer asks on here.
The notion of THE Coin is not the federal government minting and using it’s own sovereign currency. The whole idea behind it is to create a fiat asset and use that to get more of the Federal Reserve’s fiat currency (the one thing you don’t want to happen).
THE Coin would not be used to pay off debt to the banks, which you seem to be targeting. THE Coin would essentially be used to pay off debts the government has to other people, like the military, post office, social security and medicare.
We don’t even try to pay off our debt. I’m not even sure we are paying off any principle at the moment. I think we barely pay the interest like a broke college student paying minimum payments.
As for the rest of your ideas, you want to dump the House of Reps and the Senate? Oh god. As if we don’t already have a dictatorship… Besides, America is NOT a democracy, it is a Democratic Republic. It was founded as a Republic, but that has slowly changed.
Stop borrowing? Yes, I agree.
Pay back the debt? I disagree. Pay back other sovereign nations? Sure. Pay back the people (social security and private bond/bill holders)? Sure. But I don’t think we should pay back any of the debt obligations to the banks/Fed. Fuck ‘em. Let’s take a page out of the Icelandic Revolution and tell the banks to scram.
- Sha
openourminds-deactivated2013022 asked: LOL. no the coin doesn't have to be a trillion dollars. just like the FED loaning $ doesn't have to be backed by any standard. just a few keyboard crunches. the coin would be issued to PAY THE BANKS BACK with money we create out of thin aoir just as they do. it's playing their game back at them. we pay our debt back, issue a real SOVEREIGN MONETARY SYSTEM and the banks don't twist our arm like after JFK did the same. a trillion dollar coin with real value? LOL. you're too into the head space.
You’re right, the coin doesn’t have to contain a trillion dollars worth of platinum (or even be backed by a trillion dollars worth of platinum or anything for that matter). But, you would essentially be creating another fiat currency if it wasn’t backed by anything.
I also think you’re very confused by who wants and benefits from the Federal Reserve and a fiat currency system with valuation based solely on confidence. The Federal Government does not want to end the relationship with the Federal Reserve. The Reserve helps debt disappear and gives the government endless money to spend while the government lets the Federal Reserve leech off profits via the taxation arm of the government all while the government protects the value of that currency through the military arm of the state.
So, no, THE Coin isn’t trying to End the Fed, it’s giving it more power. We aren’t trying to “pay our debt back” with THE Coin, we are trying to borrow even more money by using THE Coin as leverage to obtain more Federal Reserve notes.
openourminds-deactivated2013022 asked: trillion dollar coin: pay banks back: reinstate sovereign monetary system; banks stop loaning to state, state loans to banks now. problem beginning to be solved.
I don’t think THE Coin is to become a loaning agent from State to Bank. It’s the opposite, actually. THE Coin becomes an asset which we (The Federal Government) will use to leverage with the Bank (The Federal Reserve) so that the Bank will loan us more money so that we can continue to spend.
This is the exact opposite of what we should be doing. In fact, not only are we now creating money out of thin air, we would also start creating assets out of thin air.
You see, if THE Coin isn’t actually made of a trillion dollars in platinum, it is just a fiat currency, but we aren’t using it as such. instead, we are using it as collateral or leverage to obtain another fiat currency, US Dollars, from the Federal Reserve.
Anyway, I haven’t yet looked into THE Coin with much detail because I’ve been dismissive of both the idea and the possibility that our government is that stupid or irresponsible. Minting THE Coin would be a public admittance that our currency and our system are completely arbitrary and our money is valueless and our system is imaginary.
Maybe I should look into the idea more because you never know just how crazy politicians are, but as far as I’ve read, we’d mint THE Coin and send it to the Fed as a deposit for more federal liquidity.
I may be completely wrong on this but as far as I know, that’s how it would work out.
- Sha
Hans-Hermann Hoppe On How To Blow Away Paul Krugman
Boom.
Keynesian theory destroyed in less than 60 seconds by Hans-Hermann Hoppe.
