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Post by Alex on Sept 21, 2017 21:13:07 GMT
"Is the problem you're describing not one of power, as opposed to debt? Why not address that directly?" This is tough, because banks don't spend the new money they create for free, they lend it. They lend it to businesses at ~3%, rich people who can afford down payments on homes at ~5%, and poor people at ~20%. It's a pyramid scheme that has the effect of transferring power from poor to rich.
"I'm [...] just trying to describe the world as it is" Are you sure you're not trying to *justify* the world as it is? Money was more fair in the past when it was metal, but I'm confident the current, unfair era of central database money is temporary. In the near future, it is inevitable that a finite commodity like bitcoin will begin a new era of fair money.
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Post by JP (admin) on Sept 22, 2017 0:59:38 GMT
"Is the problem you're describing not one of power, as opposed to debt? Why not address that directly?" This is tough, because banks don't spend the new money they create for free, they lend it. They lend it to businesses at ~3%, rich people who can afford down payments on homes at ~5%, and poor people at ~20%. It's a pyramid scheme that has the effect of transferring power from poor to rich. So in a bitcoin world, if you're poor (and have high credit risk) you'd be able to get a bitcoin loan at the same rate as someone who isn't a credit risk?
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Post by Alex on Sept 22, 2017 5:13:30 GMT
" So in a bitcoin world, if you're poor (and have high credit risk) you'd be able to get a bitcoin loan at the same rate as someone who isn't a credit risk? "
No; in bitcoin world, interest rates also vary with the trustworthiness of a borrower. However, there are two big differences (both of which also applied when gold was money): 1. Loans have minimal negative externalities; a contract between a borrower and a lender and doesn't impoverish holders of existing tokens by increasing the total money supply. 2. Loans are far less common. Unlike the supply of dollars, the supply of bitcoin is capped, so it's logical to expect the value a bitcoin to increase over time. Therefore, it's logical to expect a loan denominated bitcoin to be difficult to repay. The appetite of lenders will simply dry up. Raising interest rates only increases the probability of default. Borrowing money simply falls out of fashion and everyone turns their attention to saving money (aka hodling.)
Pyramid scheme destroyed, world goes on!
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Post by oliver on Sept 22, 2017 7:06:07 GMT
Pyramid scheme destroyed, world goes on! The world might, but the economy surely wouldn't. Which era was it again that was so much better? How exactly? And how does that era translate into our times? It's tempting to believe that all we have to do is surrender to an algorithm and all our social problems would be solved, but it's also naive if not downright dangerous. An algorithm is just an ideology for nerds. But I'm going to resist being dragged down a libertarian rabbit hole for once and leave you to it.
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Post by JP (admin) on Sept 22, 2017 13:40:05 GMT
1. Loans have minimal negative externalities; a contract between a borrower and a lender and doesn't impoverish holders of existing tokens by increasing the total money supply. You're going to have to do more to prove this, or at least try and engage with the points Oliver and I have brought up. We can start back at Banking 101 and work through a lending transaction from start to finish if you feel up to it. 2. Loans are far less common. Unlike the supply of dollars, the supply of bitcoin is capped, so it's logical to expect the value a bitcoin to increase over time. Therefore, it's logical to expect a loan denominated bitcoin to be difficult to repay. The appetite of lenders will simply dry up. Raising interest rates only increases the probability of default. Borrowing money simply falls out of fashion and everyone turns their attention to saving money (aka hodling.) You say this as if it was a good thing! So many great things have been created by people who, lacking funds, were able to borrow.
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Post by Alex on Sept 22, 2017 16:26:35 GMT
Oliver said: "The world might [go on], but the economy surely wouldn't." So, in a world with a money whose supply is capped, people would stop doing useful work? Ok. Why? Oliver said: "I'm going to resist being dragged down a libertarian rabbit hole for once and leave you to it." What have I said that is libertarian?!? I never said anything about libertarianism, reducing the size of government, or repealing regulations. I'm simply arguing that powerful entities are taking power from normal people by creating dollars for free, and that rational people should leave the dollar system for something fair, like bitcoin. If you want to label my view, please use anti-authoritarian or egalitarian.
JP, you said, "You're going to have to do more to prove this" but I'm not sure what you want me to prove. Do you not agree that if Alice were to create new dollars and loan them to Bob, then Charlie's dollars would be devalued by the market? Do you not agree this is a negative externality, which is pervasive and continual in the current dollar system?
Surely decreased availability to loans has both good and bad aspects. We could speculate over which are more significant. However, decreased availability to loans is merely a consequence of a money that no one can create for free. The common sense man-on-the-street knows a world in which an entity or entities can create money for free is unfair. Yet this is the reality of the dollar world, and you and Oliver support it. Please, justify your positions!
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Post by oliver on Sept 22, 2017 18:30:43 GMT
Oliver said: "The world might [go on], but the economy surely wouldn't." So, in a world with a money whose supply is capped, people would stop doing useful work? Ok. Why? Oliver said: "I'm going to resist being dragged down a libertarian rabbit hole for once and leave you to it." What have I said that is libertarian?!? I never said anything about libertarianism, reducing the size of government, or repealing regulations. I'm simply arguing that powerful entities are taking power from normal people by creating dollars for free, and that rational people should leave the dollar system for something fair, like bitcoin. If you want to label my view, please use anti-authoritarian or egalitarian. Sorry, I was quick to judge. I've had one too many discussions with self proclaimed libertarians to ever want to go there again... How is this any different from banks creating new so-called dollars? Bitcoins can be loaned on (recreated) ad infinitum just like any other financial thingamajig as long as that's not explicitly prohibited. And if so, why not prohibit lending dollars? And what are dollars? Dollar reserves? Dollar coins? Dollar bills? Dollar credits in bank accounts? Which came first and which came after? Which is actually a form of borrowing from the other? I'd go for JP's offer for a free banking 101 course if I were you. I'll watch (and learn).
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Post by Alex on Sept 22, 2017 19:59:29 GMT
The bitcoin site you linked to allows people to lend bitcoin to other people. That's it. It is quite different than banks, because banks create new dollars.
Does that make sense or not?
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Post by JP (admin) on Sept 23, 2017 16:04:18 GMT
Do you not agree that if Alice were to create new dollars and loan them to Bob, then Charlie's dollars would be devalued by the market? Do you not agree this is a negative externality, which is pervasive and continual in the current dollar system? No, I don't agree they would be devalued. Shall we work through an actual loan step-by-step? Start by assuming the economy is in balance and the demand for deposits is satisfied. Alice lends $100 in new deposits to Bob, who needs the funds to finish of an investment property. He spends $100 at a hardware store. The economy now has an excess supply of deposits. The store owner doesn't want Alice's dollars and brings them back to Alice for redemption in government banknotes. Alice promptly redeems them and cancels them. (Perhaps she gets the banknotes to pay the store owner by selling off Bob's $100 IOU to someone else.) With Alice's deposits now extinguished, the excess supply of $100 has been fixed and the market is once again balanced. And that's why Charlie's dollars won't be devalued. If the economy doesn't need them, Alice's deposits will always reflux back to Alice.
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Post by Alex on Sept 23, 2017 22:54:04 GMT
JP,
I assume you don't disagree with StatsCan that the supply of dollars increases over time. Therefore, I can only assume you believe that an increasing supply of dollars does not devalue individual dollars. You're wrong. This is Econ 101: Ceteris paribus, an increased supply of X's results in a reduction in the price of X.
You're also being deceitful. You say, "Alice lends $100 in new deposits to Bob." The issue is the creation of new dollars, yet you've created an example that ignores creation and describes a Rube Goldberg machine of what happens next.
Who created the new dollars? Why can't you say, "Alice creates 100 new dollars. Then she lends the new dollars to Bob."
Also, why does the store owner in your example want to trade the $100 he earned for $100 of government banknotes. Do they not have equal value?
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Post by Alex on Sept 23, 2017 22:56:32 GMT
JP,
I assume you don't disagree with StatsCan that the supply of dollars increases over time. Therefore, I can only assume you believe that an increasing supply of dollars does not devalue individual dollars. You're wrong. This is Econ 101: Ceteris paribus, an increased supply of X's results in a reduction in the price of X.
You're also being deceitful. You say, "Alice lends $100 in new deposits to Bob." The issue is the creation of new dollars, yet you've created an example that ignores creation and describes a Rube Goldberg machine of what happens next.
Who created the new dollars? Why can't you say, "Alice creates 100 new dollars. Then she lends the new dollars to Bob."
Also, why does the store owner in your example want to trade the $100 he earned for $100 of government banknotes. Do they not have equal value?
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Post by oliver on Sept 24, 2017 11:21:47 GMT
The bitcoin site you linked to allows people to lend bitcoin to other people. That's it. It is quite different than banks, because banks create new dollars. Does that make sense or not? Banks no more create new dollars than new bitcoins. Banks do not print dollar bills, the CB does. Banks do not mint coins, the treasury does. Banks do not create reserves, the CB does. Start with with 0 money. Tom has built a house he now wants to sell to John. John has no money. He goes to a bank for credit. Bank, after assessing John's creditworthiness and the market price of the house, credits Tom's account with $100 worth of its own credits while debiting John's account by the same amount. Those $100 worth of credits did not exist before, nor did the $100 debt. You can call them new dollars if you like, because they're worth the same as those of the FED or treasury. But the bank did not print dollar bills, mint coins or create reserves in the process. Now tell me why the same can't be done with bitcoin? And now imagine receiving income in bitcoin. From 2010 to 2017 you say its value has risen from $0.05 to over $1'000 and back down to $250. Your income would have had to change inversely if it were denominated in BTC. So if you had had an income of 20'000 btc p/a originally, it would have fallen to 1 btc p/a at some point to now be somewhere at 4 btc p/a. How is that good? Same with saving. If you were lucky enough to save half your income in 2011, that would now be worth 10'000 years worth of income today. As a newcomer to the system you'd have to live pretty long to catch up... How is that good? How does that solve inequality? This is of course all hypothetical because no monetary system has ever survived such fluctuations.
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Post by JP (admin) on Sept 24, 2017 17:02:04 GMT
I assume you don't disagree with StatsCan that the supply of dollars increases over time. Therefore, I can only assume you believe that an increasing supply of dollars does not devalue individual dollars. You're wrong. This is Econ 101: Ceteris paribus, an increased supply of X's results in a reduction in the price of X. I don't disagree with Statscan. And this isn't Econ 101, it's Money and Banking 101. You can't apply Econ 101 to Money and Banking without doing the leg work of understanding the banking system. You're also being deceitful. You say, "Alice lends $100 in new deposits to Bob." The issue is the creation of new dollars, yet you've created an example that ignores creation and describes a Rube Goldberg machine of what happens next. Who created the new dollars? Why can't you say, "Alice creates 100 new dollars. Then she lends the new dollars to Bob." I am comfortable inserting the phrase Alice creates 100 new dollars. Then she lends the new dollars to Bob in place of Alice lends $100 in new deposits to Bob. The two phrases mean the same thing. Also, why does the store owner in your example want to trade the $100 he earned for $100 of government banknotes. Do they not have equal value? Good question. I am assuming that they are not perfect substitutes i.e. a paper dollar has different properties than a bank deposit. So when the store owner has an excess supply of deposits, they try and get rid of them by redeeming them for a different instrument, bank notes, which provides them with more utility on the margin. We can work through some other options for what they might do with an excess supply of deposits, if you want.
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Post by Alex on Sept 24, 2017 20:14:58 GMT
Oliver, Did the total number of dollars go 0 to 100 in your example? Or did it stay at 0? Or are dollars like Schrodinger's cat where they can both exist and not exist simultaneously? I'll start a new thread for your questions about bitcoin.
JP, You said, we"can't apply Econ 101 to Money and Banking without doing the leg work of understanding the banking system." If true, I feel like the onus should be on you to explain why an increased supply of dollars does not devalue them.
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Post by JP (admin) on Sept 25, 2017 13:36:12 GMT
JP, If true, I feel like the onus should be on you to explain why an increased supply of dollars does not devalue them. See my description @ Sep 23, 2017 at 12:04pm. The even shorter answer: An excess supply of dollars leads to devaluation. Because banks redeem deposits at a 1:1 ratio, they cannot create an excess supply of deposits.
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