Topic: Good thing BTC isn't a debt based currency. - page 3. (Read 4328 times)

We should not project the limitations of actual government issued currencies on to Bitcoin. Remeber that if currencies become part of the free market, and many free currencies can coexist, other free currencies will come along to fill the need for growth. The real problem is the monopoly of currency that the governments try to enforce. With free market currencies like Bitcoin and others to come, this is not a problem.

This is only bad if you are stuck with only one type of currency in your country. If the market has plenty of options to choose from, the market will select the best currencies, and ditch the bad ones. Worthless pieces of paper issued by corrupt organizations would be ditched quite fast in fact.

Fiat money does not have to be debt based, our current fiat money system however IS debt based because every dollar that exists came out of the federal reserve at interest.

If the government simply issued the money itself without the federal reserve middle man, they could just print it without having to pay interest on it. We basically rent our money supply from the fed. The government doesn't need to do this, it could just print the money instead of printing the damn bonds.

Bitcoin itself is a fiat currency (as it is backed by absolutely nothing except trust in the system), it is also not debt based. Two very important attributes.

The only thing bitcoin is missing in my opinion, is that the money supply should expand infinitely at around a fixed 2-3% rate a year as Milton Friedman suggested. Since banks will not be able to engage in such heavy fractional reserve banking with bitcoins (because it will be impossible to bailout a 10:1 ratio of loans), the interest rates for depositors in banks will be higher than the inflation rate, protecting the purchasing power.

Money printing is only bad when they start to exceed the amount of products and services in the economy, and the newly printed money chases after the existing products and services in the market, instead of going to create new things such as useful infrastructure.

Printing money to create infrastructure that will be useful (NO BRIDGES TO NOWHERE): Good.
Printing money to recipients that will just use it to buy goods and services with the newly created money: Bad.

Bitcoin is an excellent project, it's not perfect, but it's far better than what we currently have.

I agree. I think the best thing that could happen to any nation is getting rid of the central bank.

Btw, the guy that will replace Trichet at the front of the European Central Bank is an italian that, surprise surprise!, is an ex-Goldman Sachs employee. The funny part is that the germans wanted Axel Webber as head of the ECB. Webber is much more hawky than the itailian GS one. But Merkel, the german canciller, started talking with Webber about what they wanted from him, and he decided to quit from the ECB and returned to the Bundesbank. Merkel did not talk about the issue for weeks, and finally accepted the italian GS one, that is much more inflationary and will keep the european countries alive inside the system by printing money so they can keep returning the money to the banks instead of defaulting on it (although there might be some partial default because the debt is so big is just unpayable, the german banks are getting ready for this, with the help of the ECB of course...)

I do accept your point that it is not all our debt directly and some of it is allowed to be rolled over forever.

I live in South Africa and our previous reserve bank governor now works for Goldman Sachs. He and a whole bunch of others (one of whom is the current deputy governor of the reserve bank) were sent on free "economic training" by Goldman in the early 90s.

When Greece was about to default they turned their energies against everything except their debt. This is not the actions of a sovereign nation, this is the actions of an underling bowing to his betters. (No offence meant to Greece or Greeks, they are simply some of the first to be hit by the system's ultimate implications)

So with Goldman being able to issue South African currency (among many, many others) and buy up US debt and "sterilize" US currency, but the government of the US only being able to issue US debt and maybe US currency, who is at who's mercy?

So you are accepting my point. Not all money is debt in the present monetary system.

Btw, it is false that the government is the slave of the banking system in the present monetary system. Both bankers and politicians benefit from it. The bankers because it allows them to emit much more debt than they could in a free market and the politicians because they get to emit more government debt and allows the government to spend more than it could only through direct taxes. The ones being screewed are the rest of the citizens that pay all this through higher prices.

The constant increases in the base money supply is simply to allow the constant growth of the fractional reserve banking system under current rules. It would collapse if it could not issue more debt continuously.

When the debt matures the government pays it back with interest, even if it was issued by the central bank. If the bank rolls it over, they simply extend the loan, but cause constant inflation. The banking industry permits this since the government is their collections agency. The government is however indebted to the banking industry and at its mercy, squandering the opportunities to break free.

Its not all debt.

Yes, there is the Primary Dealers system in the middle, but the Primary Dealers are government licensed institutions, so they know where their aliances are. The fact of the matter is that when the central banks buy government debt (and they do continuosly, but at alarming rate during this crisis) they are financing the government (even if they dont buy the debt directly to the governmetn, because by buying government debt they artificially increase the demand for government debt, thus decreasing its interest rates, allowing the government to issue more debt).

So no, wheteher the central bank can buy the government debt or through a Primary Dealers system, its not all debt.

Sadly they are all debt. The government does not loan from itself. It loans from the home market, the main participants of which are a cartel of banks with the lethal right to issue money from debt. There have already been calls to remove reserve requirements and allow the system to work legally as it does already practically. There are already countries where the reserve ratio is zero, I believe Australia is one.

As for collapsing, in the past 3 decades there have been 3 events so costly it has wiped out al profit from the banking industry for its entire history. Each time the government bailed it out at the expense of the people. You are 100% correct the system will collapse if it is all debt based. The model is very unstable.

Yes, thats the bank side. I was pointing out that its not all that way (it would have collapse if it were).

Fiat money is, itself, debt.  The framers of the US Constitution referred to them as 'debt instruments' and banned their issuance in the Coinage Act.  They are obligations of the bank itself, backed up by the "Full Faith & Credit of the United States".  When you go work for a wage, the first thing that happens is that the employer is endebted to the employee.  The employer then pays the debt by transfering that obligation to the government, via the Federal Reserve bank.  They are not called "notes" without reason, just like a mortgage is a "note".

The dollar or any other fiat currency is not based completely in debt neither. If they were they would have collapsed years ago.

The trick is that the central bank monetizes government debt which is roughtly equivalent to the government printing money.

http://lewrockwell.com/orig12/robins-r1.1.1.html