Interesting, it's as if the elite, who are supposed to be experts on finance and economics, still can't understand what Bitcoin is about! Can this be true? Or are they simply playing to their customer base?
It's too fundamental a change for them to recognise. They are too far removed from the original concepts that defined money in the first place.
A money manager these days just has to know what market he wants his clearing systems to 'clear up' next. Nobody has actually had to worry about this since the gold standard was ditched. For example, take this commentator. She asserts that bitcoin doesn't do anything for economic growth because the coins just sit on the blockchain doing nothing whereas fiat money is "lent out" to grow the economy.
Really ?
Does the balance of your bank account reduce by the amount that the bank lends. Does the balance of anybody's deposit reduce ? No. Of course it doesn't because the fact is that fiat capital is not lent out - it's simply used as a base from which to lever up new loans which are backed by debt, nothing else. Same with gold - it sits in vaults all day long and is not lent out.
Thats the kind of ape-man understanding that modern financial commentators have of finance. They've never had to visit these fundamental concepts in practice because the modern financial system has developed so far beyond them that they are "out of sight" so to speak.
Loans and debt.
Was it you who linked to an article "only an idiot takes out a loan to start a company"? I've been trying to wrap my head around lending in a Bitcoin economy. I think the goal is to change the "buy now, pay later" mentality. It's actually that mentality that has brought us to where we are, with exorbitant housing prices, etc... But did it also help fuel technological innovation? I'm not sure if we can stick that genie back in the hole? I can see Bitcoin being lent out, but not until the price has flattened out. If Bitcoin does take off, it will increase in real value far faster than a decent loan rate, thus be detrimental to the lender. It's weird.
I still can't wrap my head around this!
This is a really big deal! The entire fiat system for every country is based on an unlimited expandable quantity currency. Fiat is mostly created by bank loans as toknormal stated above. Supposedly they need 10% of actually currency in reserve, but it is actually less than that with some creative overnight account sweeping and stacking loans. Of course, Quantitative Easing and money printing can also be used to expand the money supply and would be the 'only' way the banksters want you to believe currency is created. The risk to a bank making a loan is very low they either get the asset value back if the customer doesn't pay or get the principle+interest back as total profit. The only risk to the bank is if they don't make enough loans to pay for branch expenses. For a 400BTC equivalent fiat loan, it would be profitable day 1, and profit works out to be 2.15 BTC/mo.
OK now look at a non fiat(Bitcoin/Dash) currency loan. The bank has to have 100% of the capital to loan out. They can't just create a line item on a balance sheet like with fiat. The interest rate they charge on the loan has to be high enough to cover the risk of the loan and the opportunity cost of loaning out 100% of the loan amount. So looking at a 400 BTC 5% house loan. It would take 15.5 years to payback the principal and then the remaining 14.5 years to net 373 BTC in profit. Profit works out to 1BTC/mo if the loan goes to full term. I doubt any current bank could afford a 15.5 year payback, so most "banks" would not do BTC loans. Maybe a prosper type online system would work.
I see the event to finally replace fiat with crypto is a confidence loss in fiat, governments and banks will not want to switch intentionally. The problem is that we are so levered up with debt, that switching to a non debt based currency would require all large assets to drop by 10X. The entire banking system could not be supported by the loans anymore. Governments couldn't be paid off by banks anymore. Wars would stop, because the loans to the military suppliers couldn't be made. It would be a drastic change from what we have today. I think it will be for the better with a lot less wasted on the financial sector.
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