Topic: Is Fractional Reserve banking possible with Bitcoin? - page 2. (Read 5986 times)

If you loan it, you might as well loan to a bank. In fact, the likelihood of getting scammed in a loan is probably lower with banks.

Storing your bitcoins in your paper wallet and leaving them untouched may be safe, but it is certainly not the most profitable option.

Now, let's imagine a scenario. Say, in 5 years, you want to buy a house. All you got is bitcoins. Will you part from your coins in exchange for the house, or would you rather take a loan on the house and leave your coins as collateral? What if the bank even pays interest on said collateral?

I know, a lot of people will come up with the old (incorrect) argument that interest is not possible in a deflationary currency etc. pp. Well, making a false statement over and over again...
Just because something might not be sustainable over an infinite period of time does not make it impossible.


Banks are not needed. Many debtors can do some kind of "fractional reserve". If you regularly buy from different sources with a payment target of a few weeks, you can, too It is in fact illegal for most businesses, though, while it's perfectly legal for banks.

Its possible, just that its very hard cause Bitcoin is uncontrollable (no charge back).

Yes, if the system using such a system has enough people that have faith in their dealings not to scam them out of their deposits.

I have no problems with debt. I can borrow my neighbor's car and promise to give it to him back later. The problem I have with debt is when my neighbor instead of lending me his car will lend someone else's car to me (the original owner has no idea what happened to his car) pretending it's his and then charge me extra money for it. The real situation with our paper fiat currency is even much much worse than this.

No, they won't have any value without debt around it. Self-sufficient people beyond the state do not trade any metals with strangers. They are self-sufficient, because beyond the state and the society, there is no debt, and therefore no traded metal. There you'll find the self-sufficient community.


No, never ever in the history of mankind. Business, economy and money is based on the state and on the debt to the state (Mafia).
Beyond that, humans never ever needed Business and Money. They were self-sufficient, and in some rainforests, they are self-sufficient until today, because they live beyond the state and beyond debt. And therefore beyond business. They are not busy.

bitcoin requires no bank. having or using a bank for bitcoin would be stupid. put it in your wallet and leave it there, or spend it, or loan it. I don't recommend loaning it, unless you know and trust the person, get collateral.

without a bank there can be no fractional reserves.

the fractional reserve system is a scam against everyone but the bankers.

Yes, there will always be 21,000,000 BTC as money with no debt.  The reality is M1, M2 is not money, it is checkbook money.  The people of Cyprus found out it is not money.  However, our banks are FDIC insured, thus the government will most likely print money if it has to.

You can have money without debt.
You can have an economy without debt.  
You can have businesses without debt.

I argue the economy and businesses will be better off without banking debt.  If you buy shares in asicminer, you are buying equity. However in reality you are giving your money to someone else.

Hope I understood the post.

The base money is the only true money, M0.  M1 is checkbook money that acts like money.
M0 is the money at the federal reserve held as reserves, printed dollars at banks, and currency and coins in circulation.  M0 use to be really small.

No, that's History. No debt, no economy, no labor division, no collectivism. Instead of that, you'll find self-sufficiency of self-sufficient communities beyond any business, state and debt.


Yes, but no debt means no money, no economy, no business: self-sufficiency!

* You have 300 BTC and deposit it in a bitcoin bank
* they keep 30 on reserve and loan out 270 BTC
* this 270 ends up at another BTC bank
* they keep 27 and loan out the rest, ...

There will be fractional reserve banking.  However, the point is you don't have to participate.  Everyone has their own bank, their bitcoin account.  The idea the economy needs debt to function is just propaganda of the debtors, politicians, and banks.  Apple Computer and hundreds of other companies grew at 30% per year with no debt.   In fact the country would be much better off with no debt.  Imagine if CCMO was not able to deduct debt interest?  This is one of those fraudulent private equity debt transactions.  They load it up with debt and then since debt is repaid before corporate income tax it is beneficial to them as the total debt repayment is less than the inflation rate.  CCMO use to pay taxes to the government, as result of Bain adding debt they now receive tax money.  If their depreciation deductions stops they go broke.  However, if they had no debt they would be paying massive taxes and dividends to shareholders.

If you want to loan money to someone else do it.  I don't need a semi-retarded banker to loan my BTC to his buddies and be forced to bail him out when the bank ultimately crumbles.  I don't need auditors give phoney assessments to houses so people can pull money out of them.

In summary there is no fdic bailouts, no fed talp or tarp BS, no 0% discount indow loans to their banking buddies.  Thus, if you give you hard earned BTC to a bank, like pirate passthrough bonds, goodluck with your investment.  BTW, you will earn far more real value in your BTC account than any bank has paid in the last 50 years.  To put money in a bank today loses money a 5% annually.  If you want to make aloan, why not start with a bond or equity investment?

Warren Buffett has little money in bank accounts or treasury bonds why?  Because the are crap investments!

Of course it's possible. Question should be if that's something what market is asking for. It may occur in the future but I don't think we're heading that way.

And you repeating the same nonsense over and over again doesn't make it true either. What's the opportunity value of a $300,000 mortgage? The house increasing in value I would guess would be your answer. Okay, but do you think that can go on forever? Looking at recent history, nope it can't even though the banks thought they could inflate the bubble endlessly. So opportunity value is just an empty term you just made up and is still 'nothing'. It's something you expect to be valued more in the future (or produce more value), and when it doesn't well that's too bad the normal population suffers and bankers are bailed out by more debt. So the money is still in essence being created out of nothing and then lent out, it's an evil scheme especially if you consider the macroeconomic consequences and I'm sure you know that already. If not you should get your head out of the sand and look around.

It does not create money "out of nothing". Repeating the same false statement over and over again does not make it true.
The money that's finally created during the process of lending is created out of the opportunity value of the lent money.


No. In fact, as we speak, it's already happening and it has for quite a few years. It doesn't happen on a large scale, yet, though.

There will be a time when it starts to "get out of hand", though, and that will be when bitcoin is adopted by payment processors like e.g. paypal.
Imagine the scenario where paypal starts embracing bitcoin.
They won't require their users to transfer bitcoins into the paypal system before they can use it, but will rather make it possible for all their users at once to just use bitcoin like any other currency. I.e., you have a paypal account and want to buy something that's priced in bitcoins, paypal does the currency exchange for you and off you go. They will need a large stash of coins to do so but it will nowhere be near a 100% reserve for all their users' holdings.
Paypal is just an example here. The same would apply if banks let customers have accounts in bitcoins or with credit card companies, etc. pp., you get the idea.


It doesn't. In fact, for a reserve currency, the same rules apply as for any other currency, so I don't see where there could be any problem.
Bitcoin could make a good reserve currency because its monetary base is directly electronically transferrable, which is not the case for e.g. the Dollar or the Euro.

Thanks

I think this is the answer I was looking for. So in essence the bank would be issuing IOUs redeemable for bitcoin, not bitcoins themselves, is that correct? Analogous to how gold was used prior to 1971?

You can take the cash. But the more cash you hold, more value you loose by not earning any interest. So eventually cash finds its way back to to the banks, and cycle starts again.

It's possible but unlikely to happen on a significant scale. When a bank lends money the borrower doesnt usually take cash. Instead he gets bank credit. Since the ability of banks to create bank credit is almost unlimited (with central banks watching their back), voila you get FRB. But if I borrow Bitcoins from a bank I won't want bank credit. I will want the actual BTC. So there is no scope in that scenario for FRB.

Well, they don't need to pay it with USD, they just confiscate those big player and they got a pile of them for free.

A storage service is quite practical, but loaning out bitcoin is very unlikely, since there is a high probability that the borrower will never be able to payback the loan (due to fast rise in bitcoin value)

I doubt banks would take interest in bitcoins unless they control the majority.

I'm pretty sure it will happen, and as in the current situation you can store your money on a bank and trust them, or store it under you bed(in your own wallet) and trust yourself to keep it safe. Interest in Bitcoin might appear, as the banks can lend the bitcoins, or the banks charge some amout for the service of handling your bitcoins. Depends on supply and demand.

maybee all the feature a bank has to offer in order to attract deposits is "we have never been hacked"