Houston, we have a Major Problem! - page 2.

qbg

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Quote from: CurbsideProphet on July 24, 2011, 07:59:59 AM

Quote from: D.H. on July 24, 2011, 07:56:27 AM

Quote from: bitrebel on July 24, 2011, 02:24:36 AM

If lending fiat dollars with interest is causing the world economic collapse, will lending bitcoins at interest cause an internet collapse?

If we lend bitcoins with interest, what happens when there are not enough bitcoins to pay off all the interest on the borrowed bitcoins?

Lending with interest does not imply that more money has to be created for the loan+interest to be paid back. Money circulates. The money that is used to pay the interest finds its way back into the economy and may very well be used again later to pay back the loan.

In the current, fractional reserve lending system this would be correct. With BTC's finite $21MM coins, it doesn't work this way. Eventually someone will not be paid back.

As long as there are more coins outside of the lender's control than there are due to the lender, everyone can in theory pay back. Even if the lender is owed 30 million coins, the debts can in theory be paid back as long as the lender spends enough of the coins as they are being paid back.

sadpandatech

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Activity: 504

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Quote from: nazgulnarsil on July 24, 2011, 02:30:06 AM

I has a question about interest! Instead of learning from any of the many available sources that are the hallmark of the internet age I will spew crap on forums! TALK GOOD, READ BAD.

+1

KBundy

newbie

Activity: 47

Merit: 0

Quote

And another question for the cosmos...

If I earn 100 bitcoins and I have gains of 75 bitcoins in a given year, and I choose not to cash them in because the price might go up, will I be able to pay the IRS in bitcoins, or do I tell them I didn't pay my taxes because I was waiting for bitcoins to gain in value first?

Greetings all,

This thread has been an excellent read, very interesting, and with many good points and questions.

I would like to take it back to it back to this question for a moment if possible,

1) How do you go about reporting capital gains on a currency that is technically not accepted by the agency who's trying to collect from you?

2) How would the IRS ever know you were saving up bitcoins in the first place?

-KBundy

sequence

newbie

Activity: 58

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I don't believe in lending anymore I mean look at the U.S if this most powerful nation can't fork up the cash to pay its lenders ( the biggest one being China) how can we expect 20 somethings who are computer savvy to pay interest and sum. Let's break the cycle guys!!

JohnDoe

sr. member

Activity: 392

Merit: 251

Quote from: cypherdoc on July 24, 2011, 09:09:10 AM

i propose that we keep the USD but have Bitcoins replace Gold in a Bitcoin Standard system.

Or just don't lend your money to people who probably won't be able to pay up.

Phinnaeus Gage

legendary

Activity: 1918

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Bitcoin: An Idea Worth Spending

Brain Fart Warning!

I don't have time to outline details, so I'll just leave you with this:

Bitcoin Trust Fund ---> http://www.kiva.org/about/supporters

Bitcoin: Touch--Something We Should Keep In (possibly not relative to Bitcoin, but I like the phrase nonetheless)

cypherdoc

legendary

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i propose that we keep the USD but have Bitcoins replace Gold in a Bitcoin Standard system.

evoorhees

legendary

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Democracy is the original 51% attack

Quote from: bitrebel on July 24, 2011, 02:24:36 AM

If lending fiat dollars with interest is causing the world economic collapse, will lending bitcoins at interest cause an internet collapse?

Lending fiat dollars with interest, in the way you're implying, was not the cause of the world economic collapse.

Quote from: bitrebel on July 24, 2011, 02:24:36 AM

If we lend bitcoins with interest, what happens when there are not enough bitcoins to pay off all the interest on the borrowed bitcoins?

The quantity of money is irrelevant to your question. An economy works equally well with 21m units of currency or 210m units of currency (and of course we know that btc is divisible to 8 decimals anyway).

There is nothing wrong or problematic with "interest loans." The problems arise from fiat currency and fractional reserve banking. Don't confuse the villains =)

CurbsideProphet

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Activity: 672

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Quote from: D.H. on July 24, 2011, 07:56:27 AM

Quote from: bitrebel on July 24, 2011, 02:24:36 AM

If lending fiat dollars with interest is causing the world economic collapse, will lending bitcoins at interest cause an internet collapse?

If we lend bitcoins with interest, what happens when there are not enough bitcoins to pay off all the interest on the borrowed bitcoins?

Lending with interest does not imply that more money has to be created for the loan+interest to be paid back. Money circulates. The money that is used to pay the interest finds its way back into the economy and may very well be used again later to pay back the loan.

In the current, fractional reserve lending system this would be correct. With BTC's finite $21MM coins, it doesn't work this way. Eventually someone will not be paid back.

D.H.

sr. member

Activity: 311

Merit: 251

Bitcoin.se site owner

Quote from: bitrebel on July 24, 2011, 02:24:36 AM

If lending fiat dollars with interest is causing the world economic collapse, will lending bitcoins at interest cause an internet collapse?

If we lend bitcoins with interest, what happens when there are not enough bitcoins to pay off all the interest on the borrowed bitcoins?

Lending with interest does not imply that more money has to be created for the loan+interest to be paid back. Money circulates. The money that is used to pay the interest finds its way back into the economy and may very well be used again later to pay back the loan.

ttk2

member

Activity: 76

Merit: 10

Quote from: molecular on July 24, 2011, 03:05:10 AM

Quote from: Xephan on July 24, 2011, 02:31:44 AM

Quote from: bitrebel on July 24, 2011, 02:24:36 AM

If lending fiat dollars with interest is causing the world economic collapse, will lending bitcoins at interest cause an internet collapse?

If we lend bitcoins with interest, what happens when there are not enough bitcoins to pay off all the interest on the borrowed bitcoins?

And another question for the cosmos...

If I earn 100 bitcoins and I have gains of 75 bitcoins in a given year, and I choose not to cash them in because the price might go up, will I be able to pay the IRS in bitcoins, or do I tell them I didn't pay my taxes because I was waiting for bitcoins to gain in value first?

I have come to a very important conclusion regarding bitcoins and humanity.

Bitcoins and alcohol do not mix well. At least you can't lose your bitcoin wallet at the bar. hehe
Happy Saturday Night folks!

Wink

I believe once the coin limit is hit, lending bitcoin is ALWAYS with interest since 100 btc would be worth more when returned 12 months down the road. So there's no need to charge extra interest on it hence your hypothetical insufficient bitcoins won't exist.

Why would I take the risk of lending them out if I receive the "interest" even if I keep them in my cozy wallet? I'd want "additional interest" as an incentive to give credit to someone.

Simple, because the investment (weather it be a loan or something else) would have to return more than keeping the coins in you wallet would, this encourages investment in more productive projects and generally results in a financial world where investors do a lot more investing in higher risk projects hoping for a return higher than just holding those coins. This would encourage invention and innovation by encouraging investment in those.

Man From The Future

sr. member

Activity: 371

Merit: 250

I lend person A 1 BTC, and ask for 5% interest, and it to be returned in a month.

He uses this 1BTC, and with it, is able to take a course allowing him to get a job. The job-giving person gives him 1.5BTC.

He gives back 1.05BTC at the end of the month.

That's how it works. You do something that results in you having more BTC, and the other person having less, that you can only do if you have the lent BTC.

PS: Example is rubbish, I know Sad

Xephan

newbie

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Quote from: molecular on July 24, 2011, 03:05:10 AM

Why would I take the risk of lending them out if I receive the "interest" even if I keep them in my cozy wallet? I'd want "additional interest" as an incentive to give credit to someone.

Good point there, I overlooked that Cheesy

Rob Lister

newbie

Activity: 54

Merit: 0

Quote from: bitrebel on July 24, 2011, 02:24:36 AM

If lending fiat dollars with interest is causing the world economic collapse, will lending bitcoins at interest cause an internet collapse?

If we lend bitcoins with interest, what happens when there are not enough bitcoins to pay off all the interest on the borrowed bitcoins?

And another question for the cosmos...

If I earn 100 bitcoins and I have gains of 75 bitcoins in a given year, and I choose not to cash them in because the price might go up, will I be able to pay the IRS in bitcoins, or do I tell them I didn't pay my taxes because I was waiting for bitcoins to gain in value first?

I have come to a very important conclusion regarding bitcoins and humanity.

Bitcoins and alcohol do not mix well. At least you can't lose your bitcoin wallet at the bar. hehe
Happy Saturday Night folks!

Wink

1. lending at interest isn't the cause of 'world economic collapse', however you are defining that term. fractional reserve banking may be part of the problem, but not the lending itself.

2. lending bitcoins at interest is a risk investment. you lend based on the borrowers promise to pay you back. you make it worth your risk by charging interest. if the borrower defaults, you lose your investment. that's all that happens.

3. the other question: to the extent that taxes are owed, the IRS requires payment in dollars...or blood.

molecular

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Activity: 2772

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Quote from: Xephan on July 24, 2011, 02:31:44 AM

Quote from: bitrebel on July 24, 2011, 02:24:36 AM

If lending fiat dollars with interest is causing the world economic collapse, will lending bitcoins at interest cause an internet collapse?

If we lend bitcoins with interest, what happens when there are not enough bitcoins to pay off all the interest on the borrowed bitcoins?

And another question for the cosmos...

If I earn 100 bitcoins and I have gains of 75 bitcoins in a given year, and I choose not to cash them in because the price might go up, will I be able to pay the IRS in bitcoins, or do I tell them I didn't pay my taxes because I was waiting for bitcoins to gain in value first?

I have come to a very important conclusion regarding bitcoins and humanity.

Bitcoins and alcohol do not mix well. At least you can't lose your bitcoin wallet at the bar. hehe
Happy Saturday Night folks!

Wink

I believe once the coin limit is hit, lending bitcoin is ALWAYS with interest since 100 btc would be worth more when returned 12 months down the road. So there's no need to charge extra interest on it hence your hypothetical insufficient bitcoins won't exist.

Why would I take the risk of lending them out if I receive the "interest" even if I keep them in my cozy wallet? I'd want "additional interest" as an incentive to give credit to someone.

Xephan

newbie

Activity: 42

Merit: 0

Quote from: bitrebel on July 24, 2011, 02:34:03 AM

Isn't that assuming that the price of bitcoin will rise even after the limit is mined? Im not disagreeing with that potential, but it's still potential, not definite. I guess I was assuming it would remain constant at that point, or pretty much so.

As population would inevitably go up, there should be a demand for more bitcoins to use in transactions. But since the number is limited, the only way is for the value to increase so that each bitcoin can be exchanged for more stuff. In a way it's like gold, because the supply is limited, the value keeps going up now due to increased demand.

Theoretically it should really start to increase only when the limit is mined, unless the number/value of total transactions decreases, e.g. bitcoin economy fails to take off (although if bitcoin is still around by 21M, it should have a relatively stable economy by then I would expect), or WW3 wipes out 90% of the population etc.

bitrebel

sr. member

Activity: 364

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Quote from: Oldminer on July 24, 2011, 02:37:47 AM

Because the decimal point can be shifted there will always be enough Bitcoins.

Actually, monetarily, this does not solve the dilemma.

Interest does not depend on decimals. It is the means in which something is stolen from nothing.

If there are 21 Million bitcoins potentially and someone lends someone 1 million bitcoins with .5% interest, 20,000 bitcoins are the interest. In fiat currency the interest would be stolen off, in bitcoins, it cannot really be taken anywhere, so the question is semi-redundant and a joke in fact. It's a trick question of sorts.

Oldminer

legendary

Activity: 1022

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Because the decimal point can be shifted there will always be enough Bitcoins.

And your right, Bitcoins and computers and alcohol dont mix. On this point I'm reminded of the old analogy - 'garbage in, garbage out'.

bitrebel

sr. member

Activity: 364

Merit: 251

Quote from: Xephan on July 24, 2011, 02:31:44 AM

Quote from: bitrebel on July 24, 2011, 02:24:36 AM

If lending fiat dollars with interest is causing the world economic collapse, will lending bitcoins at interest cause an internet collapse?

If we lend bitcoins with interest, what happens when there are not enough bitcoins to pay off all the interest on the borrowed bitcoins?

And another question for the cosmos...

If I earn 100 bitcoins and I have gains of 75 bitcoins in a given year, and I choose not to cash them in because the price might go up, will I be able to pay the IRS in bitcoins, or do I tell them I didn't pay my taxes because I was waiting for bitcoins to gain in value first?

I have come to a very important conclusion regarding bitcoins and humanity.

Bitcoins and alcohol do not mix well. At least you can't lose your bitcoin wallet at the bar. hehe
Happy Saturday Night folks!

Wink

I believe once the coin limit is hit, lending bitcoin is ALWAYS with interest since 100 btc would be worth more when returned 12 months down the road. So there's no need to charge extra interest on it hence your hypothetical insufficient bitcoins won't exist.

Isn't that assuming that the price of bitcoin will rise even after the limit is mined? Im not disagreeing with that potential, but it's still potential, not definite. I guess I was assuming it would remain constant at that point, or pretty much so.

Xephan

newbie

Activity: 42

Merit: 0

Quote from: bitrebel on July 24, 2011, 02:24:36 AM

If lending fiat dollars with interest is causing the world economic collapse, will lending bitcoins at interest cause an internet collapse?

If we lend bitcoins with interest, what happens when there are not enough bitcoins to pay off all the interest on the borrowed bitcoins?

And another question for the cosmos...

If I earn 100 bitcoins and I have gains of 75 bitcoins in a given year, and I choose not to cash them in because the price might go up, will I be able to pay the IRS in bitcoins, or do I tell them I didn't pay my taxes because I was waiting for bitcoins to gain in value first?

I have come to a very important conclusion regarding bitcoins and humanity.

Bitcoins and alcohol do not mix well. At least you can't lose your bitcoin wallet at the bar. hehe
Happy Saturday Night folks!

Wink

I believe once the coin limit is hit, lending bitcoin is ALWAYS with interest since 100 btc would be worth more when returned 12 months down the road. So there's no need to charge extra interest on it hence your hypothetical insufficient bitcoins won't exist.

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