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Topic: Bitcoins interest rates possible? - page 2. (Read 6550 times)

newbie
Activity: 56
Merit: 0
June 28, 2011, 05:05:37 AM
#52
How could that happen with bitcoins? If the bank lends 100btc to someone, then he hast the btc and the bank has 0 btc. If he then deposits them on a bank, then there are 100btc.  No btc were created.

there are still also 100 btc in the account of the depositor whose money was used for lending. -> 200 btc in bank deposits.
no BTC were created on the bitcoin network of course. but in the same case with USD no USD were created by the central bank either.

in both cases, it's just two people who have a deposit of 100 each at the bank ( = 200), even though there was only 100 in the beginning.

this is entirely related to the definition of money: not only central bank money (equivalent to "money on the bitcoin network) is money, but bank deposits, too.
even 2 year govt bonds are considered money by some definitions(aggregates). so if you buy a 2 year govt bond for 1000$, you give 1000$ to the govt and you are holding 1000$ worth of bonds - both of which are considered money and the money supply increases by 1000$ to 2000$.

there really is no "printing of money" at commercial banks, neither with bitcoin nor with USD.

this kind of "money multiplying" is encouraged by central banks and the FDIC, so it might be less in a bitcoin economy. but that's another story, and who knows for sure. it could exist though, so this is no difference from the current system.
legendary
Activity: 1596
Merit: 1012
Democracy is vulnerable to a 51% attack.
June 28, 2011, 05:03:29 AM
#51
I've never understood the compulsion to enact a usury system with bitcoin.

Its like insisting a car has to have a harness for an animal to pull it. Get your heads out of the bank-washed system of 'charging for money', just for a second, eh?
Would you rather have $500 next year or $500 today? $500 today includes the right to have $500 next year if you want, but also includes the ability to spend the $500 before that if you should choose to do so. You *have* to charge for money because money tomorrow is worth less than money today. Interest is the mechanism that makes investment possible.
newbie
Activity: 21
Merit: 0
June 28, 2011, 04:56:27 AM
#50
How could that happen with bitcoins? If the bank lends 100btc to someone, then he hast the btc and the bank has 0 btc. If he then deposits them on a bank, then there are 100btc.  No btc were created. 100btc in the begtinning 100btc in the end.
newbie
Activity: 56
Merit: 0
June 28, 2011, 03:50:50 AM
#49
At the moment the banks can create digits out of nothing if you lend money from them.

that's a myth, perpetrated by youtube videos and conspiracy theorists.

they don't just add digits, what is referred to as money creation by commercial bank is that money they lend out usually ends up as deposits at the same or another bank.
bank account balances are considered money, so if you depoit 100$ and they lend out 100$ to someone who puts it in his bank account, there are 200$.

the same thing could happen with bitcoins. bank account balances of a fractional reserve banking are nothing else than claims you have against the bank. but they are considered "money" by most definitions, so the base money supply is multiplied.

newbie
Activity: 25
Merit: 0
June 27, 2011, 07:12:41 PM
#48
Thanks to the new bitcoin system, you can't create money out of thin air like the banks do today.  Nor can bitcoins earn interest (unless someone is willing to part with their coins to pay for it.)

Think of it...the banks create money out of thin air, with absolutely no risk to themselves and get paid interest on it.  And when I mean no risk, the contract you sign explicitly says you will pay...or someone else will  They purchase insurance, which YOU PAY so that THEY GET PAID if you can't.  LOL, absolutely no risk whatsoever.

I love bitcoins because they are decentralized.  After securing my bitcoins, I have absolutely no need for a bank.  May they wither and die a horrible painful death, those c*cksucking leeches.

If you have to borrow to get what you want, then you're living beyond your means.  Don't sell your soul to the devil for a short gain.  That burden of debt is gonna weight heavily on your back for a long time.
newbie
Activity: 21
Merit: 0
June 27, 2011, 05:14:13 PM
#47
How could they lend 10x what they have? At the moment the banks can create digits out of nothing if you lend money from them. But how should that be possible with Bitcoins?

The only way, that i can imagine is that they give you a "electric bill" that says its wort x amount of btc. These "electric bills" could be created out of nothing. But i can t seem to imagine someone would be so stupid to take a "electric bill" instead of the bitcoins.


In former times these debt based bills were more practical, than some gold or silver that lays in a safe. And thats why they were used. But there is no reason to use an "electric bill" instead of a safer electric currency that can not be created out of thin air.
full member
Activity: 237
Merit: 100
June 27, 2011, 04:11:48 PM
#46
Thats what i mean. What is preventing the Bitcoin economy from becoming the shitty and evil thing our dollar economy is right now?

In the current system, you can lend out like 10x your own reserves.  If there's a run on your bank, the central bank will print more dollars and keep you afloat.  That can't happen in bitcoins, because there's no printing new bitcoins (above what mining does).


false. bitcoin banks can lend out 10x, too. if there is no minimum reserve requirement imposed on them, they can lend out 100x or 1000x if they want to - and if they find enough stupid people who deposit coins with them.

there is no "printing" involved when commercial banks create money. look up base money supply and the money multiplier.
money multiplier can be > 1 in a bitcoin economy, too.

factional reserve banking isnt a problem in itself. the problem is that govts insure the risks of it, so noone even cares where his money is deposited and what kind of stupid shit his bank does with it.



Right.  We don't desagree here.  They can, in principle, lend 10x reserves, but they have to find depositors who are willing to take that kind of risk.  Who in their right mind would keep a savings account generating .3% APR when the bank is lending 10x their deposit, if there is no FDIC, no Federal Reserve?  Read the rest of my post.  They'd charge exorbitant interest rates for this and still may face bank runs.  (That's why FDIC / Fed came about in the first place, to calm that wild west shit.)

Good luck trying to run an actual bank that lends 10x reserves.  You'll need a hell of a marketing team.
legendary
Activity: 1008
Merit: 1023
Democracy is the original 51% attack
June 27, 2011, 01:01:13 PM
#45


factional reserve banking isnt a problem in itself. the problem is that govts insure the risks of it, so noone even cares where his money is deposited and what kind of stupid shit his bank does with it.




BINGO
newbie
Activity: 56
Merit: 0
June 27, 2011, 12:47:15 PM
#44
Thats what i mean. What is preventing the Bitcoin economy from becoming the shitty and evil thing our dollar economy is right now?

In the current system, you can lend out like 10x your own reserves.  If there's a run on your bank, the central bank will print more dollars and keep you afloat.  That can't happen in bitcoins, because there's no printing new bitcoins (above what mining does).


false. bitcoin banks can lend out 10x, too. if there is no minimum reserve requirement imposed on them, they can lend out 100x or 1000x if they want to - and if they find enough stupid people who deposit coins with them.

there is no "printing" involved when commercial banks create money. look up base money supply and the money multiplier.
money multiplier can be > 1 in a bitcoin economy, too.

factional reserve banking isnt a problem in itself. the problem is that govts insure the risks of it, so noone even cares where his money is deposited and what kind of stupid shit his bank does with it.

legendary
Activity: 1008
Merit: 1023
Democracy is the original 51% attack
June 27, 2011, 11:34:53 AM
#43
Personally, I chose to remain debt free at all times, can't stand interest, or bankers for that matter, and I don't want to get caught in that evil downward spiral.  I don't owe anyone jack sh*t and love it that way.


If that's your choice, then good for you. For other people, borrowing money can be immensely helpful. Debt is not intrinsically an "evil downward spiral," just as a hammer is not intrinsically harmful. Irresponsible use of any tool will tend to cause pain, but one shouldn't blame the tool itself for improper usage.
legendary
Activity: 1008
Merit: 1023
Democracy is the original 51% attack
June 27, 2011, 11:22:29 AM
#42

Lending money for money creates nothing of value. 

Very false. Lending money now, in return for more money in the future, helps individuals who need money now and rewards individuals who would rather have money in the future. Not only is this a "valuable service," it is a fundamental part of an economy.

Consider the most basic example - One man has some money, but no need to spend it. Another man has no money, but a great business idea. Both men can be made better off if the former lends money to the latter at an agreed-upon interest rate. The former man will have more money than he otherwise would, and the latter man will have the opportunity to try his business idea, succeeding or failing in the process.

Without interest, there is no incentive for this exchange to occur, and thus it would not, and thus both men (and the world) are worse off.

Don't demonize interest. Demonize fiat currencies.
full member
Activity: 237
Merit: 100
June 27, 2011, 11:00:24 AM
#41
Thats what i mean. What is preventing the Bitcoin economy from becoming the shitty and evil thing our dollar economy is right now?

In the current system, you can lend out like 10x your own reserves.  If there's a run on your bank, the central bank will print more dollars and keep you afloat.  That can't happen in bitcoins, because there's no printing new bitcoins (above what mining does).

So, if banks lend out more than they have, they will go bust in periodic bank runs.

This means *far less* lending, because depositors to the bank are far less secure.  Thus, they will demand higher interest rates.  (Yes, even though the currency is deflationary, interest rates would be very high because of this risk.)  So, there wouldn't be so much easy credit.  The housing crisis probably never would have happened, for instance.  If something like that did happen, the fed wouldn't have increased the money supply by trillions, which is why you get .5% on a savings account right now: you are competing as a lender with the Fed, who is giving select big banks basically free money.

But there will always be risk-taking in any economy, always bubbles, always human irrationality.  No currency can stop that.  It's driven by human psychology and the dynamics of exchange.
newbie
Activity: 56
Merit: 0
June 27, 2011, 10:35:06 AM
#40
even if bitcoin is the currency I doubt bitcoin will be the method of payment of the end-user, more like the back-end of banks and some enthusiasts. so banks basically do what they do now, except their refinancing would be vastly different because there is no central bank, which is the most interesting part of bitcoin and a huge difference.
but besides that I don't think that much would change.

i see the utility in accepting 'promissory notes' and how that paper currency system has been transmuted into fiat.  i don't see why the end user would accept payment in place of bitcoin when they could just accept bitcoin, except for instant POS transactions where a provider would take a small fee.

not sure I see what you mean.
bitcoin and its flooding algorithm doesnt scale well. the developers acknowledge that and talk about "leightweight" clients that trust another node for their transactions - that's a bank.
I fail to see what that has to do with promissory notes.

there are many other reasons joe schmoe would not communicate with the bitcoin network directly, but scalability alone would be enough.
your wallet/mobile phone/whatever-device you use for payments will not hold the entire transaction database of the whole world.
newbie
Activity: 42
Merit: 0
June 27, 2011, 10:25:02 AM
#39
even if bitcoin is the currency I doubt bitcoin will be the method of payment of the end-user, more like the back-end of banks and some enthusiasts. so banks basically do what they do now, except their refinancing would be vastly different because there is no central bank, which is the most interesting part of bitcoin and a huge difference.
but besides that I don't think that much would change.

i see the utility in accepting 'promissory notes' and how that paper currency system has been transmuted into fiat.  i don't see why the end user would accept payment in place of bitcoin when they could just accept bitcoin, except for instant POS transactions where a provider would take a small fee.

http://flexcoin.com is the first Bitcoin Bank that pays interest ...  granted it's "funny" how it does as compared to a traditional bank, but it's the first time in history a bitcoin account pays interest..  you'll see the site change look and feel by July 1st.

Seriously though, you'd have to be nuts to deposit your hard-earned coins into an unregulated, untested, unknown 'bank', with no backing and no guarantees run from god-knows-where, just for a tiny bit of interest.   Where I am going to turn to when you steal all my money?  I'll have to tell the bitcoin forum and everyone will laugh in my face.
legendary
Activity: 2408
Merit: 1121
June 27, 2011, 10:11:55 AM
#38
I've never understood the compulsion to enact a usury system with bitcoin.

Its like insisting a car has to have a harness for an animal to pull it. Get your heads out of the bank-washed system of 'charging for money', just for a second, eh?

sr. member
Activity: 448
Merit: 251
Bitcoin
June 27, 2011, 09:28:21 AM
#37
I just noticed also that we already have a bitcoin bank just round the corner, that pays interest. They don't say how much though!

http://flexcoin.com/

Sorry but I can't take seriously a 'bank' that runs on wordpress! Grin

It's just a wordpress placeholder... the site goes live July 1st... and it won't be running wordpress other than it's blog section....  we're not putting the live code up until it passes the security audit...  

It's an active miner,  and is in a few pools and on it's own as well (graphics card mining across several machines)...  what it does is pay interest in the form of dividends that are earned for accounts that have a positive balance in there...

No one is going to get rich from what they get as interest,   but that combined with deflation should be helpful for most individuals.

http://flexcoin.com is the first Bitcoin Bank that pays interest ...  granted it's "funny" how it does as compared to a traditional bank, but it's the first time in history a bitcoin account pays interest..  you'll see the site change look and feel by July 1st.
newbie
Activity: 56
Merit: 0
June 27, 2011, 09:05:12 AM
#36
Someone mentioned fractional reserve banking... although it could exist with bitcoins, I don't see the same advantages.  While I need a bank to protect my $millions (I wish) and make transactions for me, I could do that myself with bitcoins.  I also don't need interest to maintain my wealth as bitcoins are inherently deflationary.  Actually my biggest concern with bitcoins is the incentive to hoard instead of spend or invest.  You might not see that as a problem but it hasn't ever been tried AFAIK so it's a leap of faith at least.

I'll assume for a moment that there will be bitcoin banks and such.

I think it is a misconception that bitcoin is inherently deflationary. it very much depends.
with bitcoin only the base money supply is constant eventually. that is less inflationary than all other fiat currencies, but it doesnt mean there is no inflation. there can be, when banks do what banks do: create money by creating credit.

see the money supply definitions M1-M3.


even if bitcoin is the currency I doubt bitcoin will be the method of payment of the end-user, more like the back-end of banks and some enthusiasts. so banks basically do what they do now, except their refinancing would be vastly different because there is no central bank, which is the most interesting part of bitcoin and a huge difference.
but besides that I don't think that much would change.

newbie
Activity: 42
Merit: 0
June 27, 2011, 08:36:01 AM
#35
I just noticed also that we already have a bitcoin bank just round the corner, that pays interest. They don't say how much though!

http://flexcoin.com/

Sorry but I can't take seriously a 'bank' that runs on wordpress! Grin
newbie
Activity: 42
Merit: 0
June 27, 2011, 08:34:51 AM
#34
Someone mentioned fractional reserve banking... although it could exist with bitcoins, I don't see the same advantages.  While I need a bank to protect my $millions (I wish) and make transactions for me, I could do that myself with bitcoins.  I also don't need interest to maintain my wealth as bitcoins are inherently deflationary.  Actually my biggest concern with bitcoins is the incentive to hoard instead of spend or invest.  You might not see that as a problem but it hasn't ever been tried AFAIK so it's a leap of faith at least.
member
Activity: 76
Merit: 10
June 27, 2011, 08:29:24 AM
#33
I just noticed also that we already have a bitcoin bank just round the corner, that pays interest. They don't say how much though!

http://flexcoin.com/
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