Topic: Good thing BTC isn't a debt based currency. - page 2. (Read 4328 times)

I absolutely support a free market of currencies, bitcoin doesn't have to be the only one. Perhaps another one can pop up using the same technology as bitcoin with different parameters some day.

The market will determine who's the winner in the long run.


Only the coins which are issued by the US Treasury are not debt based.



If that's the way it worked, then there would not be a national debt.

Why do you think they need to raise the debt ceiling in order to borrow more money from the fed?

The fed itself has said that if every debt was paid off that was owed to the fed, there would be no more money in our monetary system.


Perhaps you should do a little research on the term Fiat.

http://en.wikipedia.org/wiki/Fiat_money


I used to think the same, that Milton Friedman was wrong about monetary policy.

The trouble with no inflation is eventually over periods of several generations, the wealth will be consolidated among the few, inflation will make that harder, and with higher savings rate, it resolves the issue with loss of purchasing power.

Once the few have most of the currency they can use it to pretty much enslave the masses. They can make credit cheap, putting everyone in debt, and then make credit expensive, forcing everyone into default.

Boom and bust.

But in order to do that, you need to have control of enough currency.


Yes, but the new things that are created either will increase production, or money can chase after those new things. For example if the government prints $250,000 out of thin air, and uses the money to build a house, something now exists that didn't exist before (the house), and the money in the financial system can chase after the house itself.

In other words, the money isn't being used just to blow it on non-capital goods.

If the government prints $250,000 to build 10x $25,000 tractors, and then those tractors are used to increase farm production, you have more money in the system, but there are also more products.

No doubt about it, printing money is a dangerous tool that can be used to cause incredible damage to the economy, but there are correct instances where it can be used to benefit.

If they use it to build 10 tractors that just sit and rust, it's bad.
If they use it to build a house that just sits empty and falls apart, it's bad.

It's a tool. It can be used for good, and it can be used for bad.


This isn't central planning, nor is it the abolishment of the price system (which for some reason you think it is).


Because the quantity of the money was not controlled. It hyperinflates because the government goes out of control. A fixed-inflation bitcoin currency won't have the problem of a government going out of control with creation of currency units.

It does not matter what the money is, all that matters is who controls the quantity.


A fiat currency is any paper money system that the government issues.
A debt based currency is a form of money that is borrowed at interest, when it enters into the money supply.

Let's create a monetary system similiar to what exists today.

We're all stranded on an Island, you are the government, and I am the central bank.

The people want places to sleep in, so they all vote to spend $10,000 that will be used to pay people to build huts. You then create $10,000 of government bonds that pay 10% interest. I buy those bonds for $10,000 and now you spend that $10,000 into the local economy. The money is spent in all areas of the local economy, such as collecting food, wood, leaves, etc.

A medium of exchange has been established for the local population.

However, the government now owes me $11,000 in one year. How are you going to pay it without getting into even more debt? You can't.

And the sick thing of it all is, instead of printing $10,000 of bonds, you could have just printed $10,000 and told me to go screw myself.

By the way, all online video games with economies, have debt free fiat currencies. EVE-Online is a prime example. The game companies have no reason to manipulate the game currency like real life banksters do.

Nonsense.  Debt based means that the paper is an abstraction of some third party's obligation to perform, otherwise known as a "debt".

Fiat means "by decree", debt based means backed by a debt instrument. It is a bit of a stretch to refer to a receipt for gold as "debt based" when the money is not secured against "debt as in a loan"

Um, no.  Every fiat currency is debt based by definition because the paper note is an abstraction of value, not the value itself.  The paper notes represent an obligation of a third party, in most cases, of the entity that issued it.  Even warehouse receipts for gold bullion are debt, because those receipts represent an obligation of a third party to perform an act, namely exchange a specific weight in gold upon demand with said receipt.  Although a gold standard is certain a more reliable form of debt, only the physical trading of the gold itself does not represent a transfer of a debt.  Bitcoin is very much like gold (and silver) in this respect, as it doesn't represent a promise of value (gold standard) nor any other form of third party obligation (futures trading, fiat currencies the world over, and just about any other contract based form of trade, explicit or implicit), as bitcoin is the object of value.  This is one of the attributes that makes Bitcoin so revolutionary.   Even the Liberty Dollar was a debt whenever the paper notes were used, as the gold was stored in a vault and if you showed up there with the paper notes, Liberty Reserve LLC would have been obligated (under implicit contract) to provide all the gold those notes represented.

Aaah, fix the system thinking, I remember it fondly

Have you ever wondered about prices, what they are and how on earth we come up with them. Prices are subjective human beings' way of determining how much effort something is worth to them. If you have to pay $100 for an item slightly better than a similar $90 item then you will be free to decide if the additional features are worth the effort you personally have in generating $10.

Governments spend money from people who worked for it without having had to work for it. This one simple fact makes building a bridge to somewhere completely impossible to them. I've worked for government and I can tell you now, the problem is not corruption, it is thinking that more controls, better controls, controls from smarter people, and controls control controls will ultimately fix a fundamental underlying flaw; government does not respond to the price mechanism, if they are ineffective, they can still fund themselves tomorrow at gunpoint.

Ludwig von Mises predicted the collapse of the Soviet Union on exactly this basis. Since they don't know what people are willing to work for, what people want on an individual level (which is what the price mechanism does) then they are doomed to misspend funds to the point of collapse.

Another problem is, who has the right to purchase assets with money injected via money creation, even if exactly 0% inflation (non-flation ) is possible? Our elected officials? Bankers? And if we allow this privilege for someone how do we know they won't simply start buying up all manner of assets for themselves?

A better solution would be to let the benefits accrue to the existing market participants through price deflation.

As explained and discussed above, not all the money in the present system is debt based.


The governments does not pay interest on the money it gets from its central bank. Yes the government pays interest on the bonds the central bank buys, but the central bank returns the benefits it gets to the government (including the interest it charges to the banks), so for all practical matter the government is not paying it.


This is exaclty what its already happening in the present system.


Bitcoin is not a fiat currency. Fiat means imposed by force, usually by the government.

If you define fiat as a currency not backed by anything, then gold and silver are also fiat, since they are not backed by anything. This definition does not make sense.


Milton Friedman was very wrong regarding monetary policy (he was right about other things). There is no reason why there should be a 2-3% inflation rate (why not 1%?, why not 5%?). There is absolutely no reason in monetary theory why it should be this way.


Do you realize that money does not have a direct relationship with the amount of products and services in the economy because prices change? What you mean is that you want some price index to remain relatively constant. There is no reason why this should be this way.

Also, do you realize that "to create new things such as useful infrastructure" money has to "chase after the existing products and services in the market"?


This is a fallacy. You are presuposing that the government without a price system can decide what is good and bad investments. There is a reason why there is a market and government central planning does not work.

Again both things create new infrastructure and chasing existing goods and services go together.


You can go and try to create an alternative, but there is a reason why the system your propose has never emerge from the civil society and the examples in history are all imposed by the governments using force. And btw, they have all hyperinflated creating big poverty.