Just because there are only 21 million actual bitcoins, doesn't mean the bitcoin economy is restricted to that amount.
I think Joel Katz is good at explaining this, although I'm not sure if he'll bother since he has done so many times on this forum already.
For example, it is entirely possible to accrue a legitimate debt greater than 21 million BTC, and furthermore it is possible to be able to repay such a debt.
Topic: Bitcoin major fail - doesn't allow credit creation (aka deflationary currency) - page 14. (Read 22242 times)
November 01, 2012, 06:32:10 PM
November 01, 2012, 06:17:14 PM
Hey guys, I'm almost sold on BTC, but here's something that I can't get over it: the fact that BTC does not allow some sort of controlled credit creation.
I believe you heard this argument before and if you can explain it to me or point me in the right direction I would appreciate it.
The issue that I see with Bitcoin is that it doesn't allow credit creation. (and no, loans are not the same thing, they are just a redirect of the capital from other purposes)
Before telling me how credit is bad and this has doomed our current system, I would like to tell you that I do share that idea on credit is bad for ... consumption! You shouldn't consume more that you produce and if you want to consume more, well, go produce more money (aka get another job or a raise). Or start saving for that new car model and buy it when you have enough money. Just like the balanced budget that our governments are trying to achieve.
However, credit as capital investment into production is something good. If there is no credit, basically a company that produces goods and services which wants to expand, it would have to start saving those money and in one, two whatever how many years would have enough money to buy that new warehouse, land or equipment. Well, that sucks; I don't think we'll progress too fast with this approach.
There is also a blur line between credit for consumption and credit for production especially when the consumer and the company both default on the loan. Those money would be "lost" no matter their initial purpose.
Bitcoin tries to solve this problem with a simple answer: no credit whatsoever. This becomes obvious especially after the 21 mil Bitcoins are mined.
So how can Bitcoin have a future if it is a deflationary currency with a set in stone number of coins? After 21 mil BTCs are mined even loans are not the answer because there is no money created to cover the interest. If everybody start making loans with interest, there will soon be not enough BTCs in circulation to cover the interest, not to mention the principal. Maybe loans at 0% since the currency appreciates itself and the appreciation is like an interest? Well, why take the risk to loan the money at 0% and not just keep it in your wallet with no risk of losing them. They'll appreciate there with no problem.
That's the big fail I see in Bitcoin. Please convince me that I'm wrong.
I believe you heard this argument before and if you can explain it to me or point me in the right direction I would appreciate it.
The issue that I see with Bitcoin is that it doesn't allow credit creation. (and no, loans are not the same thing, they are just a redirect of the capital from other purposes)
Before telling me how credit is bad and this has doomed our current system, I would like to tell you that I do share that idea on credit is bad for ... consumption! You shouldn't consume more that you produce and if you want to consume more, well, go produce more money (aka get another job or a raise). Or start saving for that new car model and buy it when you have enough money. Just like the balanced budget that our governments are trying to achieve.
However, credit as capital investment into production is something good. If there is no credit, basically a company that produces goods and services which wants to expand, it would have to start saving those money and in one, two whatever how many years would have enough money to buy that new warehouse, land or equipment. Well, that sucks; I don't think we'll progress too fast with this approach.
There is also a blur line between credit for consumption and credit for production especially when the consumer and the company both default on the loan. Those money would be "lost" no matter their initial purpose.
Bitcoin tries to solve this problem with a simple answer: no credit whatsoever. This becomes obvious especially after the 21 mil Bitcoins are mined.
So how can Bitcoin have a future if it is a deflationary currency with a set in stone number of coins? After 21 mil BTCs are mined even loans are not the answer because there is no money created to cover the interest. If everybody start making loans with interest, there will soon be not enough BTCs in circulation to cover the interest, not to mention the principal. Maybe loans at 0% since the currency appreciates itself and the appreciation is like an interest? Well, why take the risk to loan the money at 0% and not just keep it in your wallet with no risk of losing them. They'll appreciate there with no problem.
That's the big fail I see in Bitcoin. Please convince me that I'm wrong.
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