Topic: Is there room for a State Run Cryptocurrency? - page 5. (Read 5415 times)

As I said before, I don't understand your example of BMW lending cars, so let's keep it simple and proceed now from bitcoins (apart from gold). FRB is irrelevant here, and to make things even simpler, let's assume there are no reserve requirements at all (a good assumption since there is no Central Bank to begin with). Could the banks then create bitcoins out of the thin air just like they are said to do with fiat?

No they can't create bit coins. But they can still create credit money

But the credit money created by today's banks is the same fiat that is emitted by the Central Bank. And do you know why? Wink

Haha we're back to this again? Thought experiment: if Central Bank suddenly stopped printing money, would the money supply still increase? Or would it remained capped?

Thats basically the argument we're having

Back to what? Now you seem to be trying to avoid cornering at all means. Banks that create money through credit are a Central Bank's proxies. And if the Central Bank would somehow want to stop for some fancy reason its currency from circulation, no bank would be able to create money in the form of this currency "out of the thin air". I think I made it pretty evident. Central Bank money printing is a metaphor, credit money is just another way of emitting money into circulation by a Central Bank through its proxies (though there are other ways as well).

tee-rex

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Quote from: DeathAndTaxes on July 30, 2014, 04:38:35 PM

Quote from: tee-rex on July 30, 2014, 04:40:54 PM

I believe that if Bitcoin becomes mainstream, a fractional reserve banking system will develop and there will probably be one or more central banks. These central banks will be created by banks or their regulators and may or may not be government-controlled. They will pool member deposits and provide deposit insurance in order to reduce the impact of bank runs and they will have to set reserve requirements.

I doubt that. Not that someone won't try FRB with Bitcoin that is almost an inevitability; bankers are going to banker. Central banks would not have much interest in a system where they can't "magic up" more money in the monetary base. Also without the unlimited printing of central banks we would have seen the complete collapse of the banking system worldwide and probably the end of one or more modern currencies. You can't do that with Bitcoin. It is more like FRB using gold deposits. Central banks are a lot less important in a system where they can't pretend that they can shape and control the economy.

It will be more like the original central banks when there was a gold standard. The banks' motivation for forming central banks will be the desire to get customers to deposit bitcoins with them. Without protections such as deposit insurance and a lender of last resort, it would not be wise to trust a bank with your money. Governments will probably get involved because it is in their natures.

Why would you want to deposit your bitcoins into a bank? Bitcoin value can grow by itself even with no help from the bank with its interest paid on deposits.

Why would you turn down risk-free interest on your bitcoins (if it were available)?

Risk-free interest? In a bank? Are you kidding?

Full Spectrum

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If anything, this state run and backed crypto would probably look something like the Anthem Vault gold backed coin

BtcGains

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Quote from: tee-rex on July 28, 2014, 08:23:26 AM

Quote from: Scott-Maxwell on July 28, 2014, 06:14:57 AM

Hi,

I've been asking for opinions about a proposal that's come up here in Scotland. We're going to the polls in the next month to decide whether we want to split from England and become an independent country - basically the end of the United Kingdom that's lasted 400 years.

There's been plenty of discussion not only on whether we should, but whether we could (practically.) One of the major stumbling blocks is the use of GBP - the Bank of England has said a post-independent Scotland can't use it. Bit mean, but there you are.

So the question came up - If Scotland needs a new currency, why not set up a State-Run Cryptocurrency?

Here's my thoughts on the issue.

http://cryptocurrencymadesimple.com/should-scotland-set-up-a-state-run-cryptocurrency/

Also, it appears that Ecuador got there first:

http://cryptocurrencymadesimple.com/ecuador-nationalise-cryptocurrency/

Would love to here what you guys think.

State-run cryptocurrency would just be another form of fiat. Decentralization is what differentiates, say, bitcoin from dollar and other state-controlled currencies, that is absence of the governing body (central bank) which is given the privilege of emitting currency monopolistically.

Wrong...
Decentralisation is bitcoins specialty not crypto in general.
A state run crypto would not count under what bitcoin is designed for but rather what they make of it

twiifm

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Quote from: tee-rex on July 30, 2014, 04:30:29 PM

Quote from: twiifm on July 30, 2014, 01:06:37 PM

As I said before, I don't understand your example of BMW lending cars, so let's keep it simple and proceed now from bitcoins (apart from gold). FRB is irrelevant here, and to make things even simpler, let's assume there are no reserve requirements at all (a good assumption since there is no Central Bank to begin with). Could the banks then create bitcoins out of the thin air just like they are said to do with fiat?

No they can't create bit coins. But they can still create credit money

But the credit money created by today's banks is the same fiat that is emitted by the Central Bank. And do you know why? Wink

Haha we're back to this again? Thought experiment: if Central Bank suddenly stopped printing money, would the money supply still increase? Or would it remained capped?

Thats basically the argument we're having

tee-rex

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As I said before, I don't understand your example of BMW lending cars, so let's keep it simple and proceed now from bitcoins (apart from gold). FRB is irrelevant here, and to make things even simpler, let's assume there are no reserve requirements at all (a good assumption since there is no Central Bank to begin with). Could the banks then create bitcoins out of the thin air just like they are said to do with fiat?

I believe that if Bitcoin becomes mainstream, a fractional reserve banking system will develop and there will probably be one or more central banks. These central banks will be created by banks or their regulators and may or may not be government-controlled. They will pool member deposits and provide deposit insurance in order to reduce the impact of bank runs and they will have to set reserve requirements.

I believe that this is the most likely scenario (second most likely being the demise of Bitcoin). We were here before 100 years ago, so I wonder how it will play out.

Why would you want to deposit your bitcoins into a bank? Bitcoin value can grow by itself even with no help from the bank with its interest paid on deposits.

DeathAndTaxes

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Gerald Davis

Quote from: twiifm on July 30, 2014, 01:06:37 PM

I believe that if Bitcoin becomes mainstream, a fractional reserve banking system will develop and there will probably be one or more central banks. These central banks will be created by banks or their regulators and may or may not be government-controlled. They will pool member deposits and provide deposit insurance in order to reduce the impact of bank runs and they will have to set reserve requirements.

I doubt that. Not that someone won't try FRB with Bitcoin that is almost an inevitability; bankers are going to banker. Central banks would not have much interest in a system where they can't "magic up" more money in the monetary base. Also without the unlimited printing of central banks we would have seen the complete collapse of the banking system worldwide and probably the end of one or more modern currencies. You can't do that with Bitcoin. It is more like FRB using gold deposits. Central banks are a lot less important in a system where they can't pretend that they can shape and control the economy.

tee-rex

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As I said before, I don't understand your example of BMW lending cars, so let's keep it simple and proceed now from bitcoins (apart from gold). FRB is irrelevant here, and to make things even simpler, let's assume there are no reserve requirements at all (a good assumption since there is no Central Bank to begin with). Could the banks then create bitcoins out of the thin air just like they are said to do with fiat?

No they can't create bit coins. But they can still create credit money

But the credit money created by today's banks is the same fiat that is emitted by the Central Bank. And do you know why? Wink

twiifm

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Quote from: twiifm on July 30, 2014, 12:20:37 PM

Quote from: tee-rex on July 30, 2014, 10:54:59 AM

Quote from: twiifm on July 30, 2014, 12:20:37 PM

Car finance is just an example of where a bank can create credit w/o deposits. I just picked that because people are familiar with it. You go to BMW to lease a car. BMWFS creates a loan to itself out of thin air. BMW buys the car then rents the car to you. Then They pack these leases together as an asset backed security and these papers are used as money. No deposits required

Why should BMW buy you a car if they can produce it for you? In this example BMW serves as a central bank. I still don't understand the essence of your example.

They produce the cars but they are using it as asset to create credit. Dont ask me why they do. Its what they do. They do this because not many people have 60K cash to buy their cars

The credit is the money. In modern economies half the money is credit. Why is this so hard to understand? Not just cars but all over the finance sector

I don't in the least deny this. But you seem to be missing my point. There are only two ways a bank can create money out of the thin air. In the first case if it works as a central bank proxy (as it happens when people say that banks create money out of nothing), or it is a central bank itself. It becomes pretty evident if you take an example with no central bank. Could banks create bitcoins out of thin air? No, they could only issue "paper" bitcoins.

Also, there is nothing modern or new in this "Modern Monetary Theory".

Who said anything about new? I said my view of money comes from MMT. As opposed to neoclassical, Austrian, or other.

I'm not missing your point. You just have a neoclassical view of money and you are glossing over the shadow bank industry. You are arguing the view of neoclassicism and I'm arguing the view of MMT

Ok imagine if we revert back to a gold standard system. Banks could still make loans using FRB but they are required to have some reserves as deposits due to regulations. But instead of going back in time let's say we just replace the modern system w gold standard. BMWFS can still keep financing loans using their cars as assets. When you finance a car from BMW they create a loan. When that car is paid off the loan is taken off their balance sheet the interest payments remain in the supply as an monetary expansion. They can also create asset backed securities on these and use these as liquid money. You see how this has nothing to do w Central Banks or commercial / deposit banks?

If you look at the events leading up to 2008 GFC. This was what was happening. People like Yellen is aware of this. The issue is how to regulate this shadow bank money. Nobody knows how to deal with it

As I said before, I don't understand your example of BMW lending cars, so let's keep it simple and proceed now from bitcoins (apart from gold). FRB is irrelevant here, and to make things even simpler, let's assume there are no reserve requirements at all (a good assumption since there is no Central Bank to begin with). Could the banks then create bitcoins out of the thin air just like they are said to do with fiat?

No they can't create bit coins. But they can still create credit money

tee-rex

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Quote from: tee-rex on July 30, 2014, 10:54:59 AM

Quote from: tee-rex on July 30, 2014, 10:54:59 AM

Car finance is just an example of where a bank can create credit w/o deposits. I just picked that because people are familiar with it. You go to BMW to lease a car. BMWFS creates a loan to itself out of thin air. BMW buys the car then rents the car to you. Then They pack these leases together as an asset backed security and these papers are used as money. No deposits required

Why should BMW buy you a car if they can produce it for you? In this example BMW serves as a central bank. I still don't understand the essence of your example.

They produce the cars but they are using it as asset to create credit. Dont ask me why they do. Its what they do. They do this because not many people have 60K cash to buy their cars

The credit is the money. In modern economies half the money is credit. Why is this so hard to understand? Not just cars but all over the finance sector

I don't in the least deny this. But you seem to be missing my point. There are only two ways a bank can create money out of the thin air. In the first case if it works as a central bank proxy (as it happens when people say that banks create money out of nothing), or it is a central bank itself. It becomes pretty evident if you take an example with no central bank. Could banks create bitcoins out of thin air? No, they could only issue "paper" bitcoins.

Also, there is nothing modern or new in this "Modern Monetary Theory".

Who said anything about new? I said my view of money comes from MMT. As opposed to neoclassical, Austrian, or other.

I'm not missing your point. You just have a neoclassical view of money and you are glossing over the shadow bank industry. You are arguing the view of neoclassicism and I'm arguing the view of MMT

Ok imagine if we revert back to a gold standard system. Banks could still make loans using FRB but they are required to have some reserves as deposits due to regulations. But instead of going back in time let's say we just replace the modern system w gold standard. BMWFS can still keep financing loans using their cars as assets. When you finance a car from BMW they create a loan. When that car is paid off the loan is taken off their balance sheet the interest payments remain in the supply as an monetary expansion. They can also create asset backed securities on these and use these as liquid money. You see how this has nothing to do w Central Banks or commercial / deposit banks?

If you look at the events leading up to 2008 GFC. This was what was happening. People like Yellen is aware of this. The issue is how to regulate this shadow bank money. Nobody knows how to deal with it

As I said before, I don't understand your example of BMW lending cars, so let's keep it simple and proceed now from bitcoins (apart from gold). FRB is irrelevant here, and to make things even simpler, let's assume there are no reserve requirements at all (a good assumption since there is no Central Bank to begin with). Could the banks then create bitcoins out of the thin air just like they are said to do with fiat?

counter

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Time is on our side, yes it is!

Well it seems many people are against the idea. I think it would be good in some ways because there would be the benefit of transparency in some ways. I'd say if something like this was to happen the system would have to be more transparent then even Bitcoin for it to work. Being able to follow funds would cut down on corruption I'd like to believe. I'm sure in some ways it is just wishful thinking on my part but at the same time I firmly believe it is many times better then the system we have now.

I'm sure there would be new problems that haven't been thought of yet but lack of transparency with the current model outways the negatives of a cryptographic system IMO.

twiifm

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Car finance is just an example of where a bank can create credit w/o deposits. I just picked that because people are familiar with it. You go to BMW to lease a car. BMWFS creates a loan to itself out of thin air. BMW buys the car then rents the car to you. Then They pack these leases together as an asset backed security and these papers are used as money. No deposits required

Why should BMW buy you a car if they can produce it for you? In this example BMW serves as a central bank. I still don't understand the essence of your example.

They produce the cars but they are using it as asset to create credit. Dont ask me why they do. Its what they do. They do this because not many people have 60K cash to buy their cars

The credit is the money. In modern economies half the money is credit. Why is this so hard to understand? Not just cars but all over the finance sector

I don't in the least deny this. But you seem to be missing my point. There are only two ways a bank can create money out of the thin air. In the first case if it works as a central bank proxy (as it happens when people say that banks create money out of nothing), or it is a central bank itself. It becomes pretty evident if you take an example with no central bank. Could banks create bitcoins out of thin air? No, they could only issue "paper" bitcoins.

Also, there is nothing modern or new in this "Modern Monetary Theory".

Who said anything about new? I said my view of money comes from MMT. As opposed to neoclassical, Austrian, or other.

I'm not missing your point. You just have a neoclassical view of money and you are glossing over the shadow bank industry. You are arguing the view of neoclassicism and I'm arguing the view of MMT

Ok imagine if we revert back to a gold standard system. Banks could still make loans using FRB but they are required to have some reserves as deposits due to regulations. But instead of going back in time let's say we just replace the modern system w gold standard. BMWFS can still keep financing loans using their cars as assets. When you finance a car from BMW they create a loan. When that car is paid off the loan is taken off their balance sheet the interest payments remain in the supply as an monetary expansion. They can also create asset backed securities on these and use these as liquid money. You see how this has nothing to do w Central Banks or commercial / deposit banks?

If you look at the events leading up to 2008 GFC. This was what was happening. People like Yellen is aware of this. The issue is how to regulate this shadow bank money. Nobody knows how to deal with it

tee-rex

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Car finance is just an example of where a bank can create credit w/o deposits. I just picked that because people are familiar with it. You go to BMW to lease a car. BMWFS creates a loan to itself out of thin air. BMW buys the car then rents the car to you. Then They pack these leases together as an asset backed security and these papers are used as money. No deposits required

Why should BMW buy you a car if they can produce it for you? In this example BMW serves as a central bank. I still don't understand the essence of your example.

They produce the cars but they are using it as asset to create credit. Dont ask me why they do. Its what they do. They do this because not many people have 60K cash to buy their cars

The credit is the money. In modern economies half the money is credit. Why is this so hard to understand? Not just cars but all over the finance sector

I don't in the least deny this. But you seem to be missing my point. There are only two ways a bank can create money out of the thin air. In the first case if it works as a central bank proxy (as it happens when people say that banks create money out of nothing), or it is a central bank itself. It becomes pretty evident if you take an example with no central bank. Could banks create bitcoins out of thin air? No, they could only issue "paper" bitcoins.

Also, there is nothing modern or new in this "Modern Monetary Theory".

twiifm

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Car finance is just an example of where a bank can create credit w/o deposits. I just picked that because people are familiar with it. You go to BMW to lease a car. BMWFS creates a loan to itself out of thin air. BMW buys the car then rents the car to you. Then They pack these leases together as an asset backed security and these papers are used as money. No deposits required

Why should BMW buy you a car if they can produce it for you? In this example BMW serves as a central bank. I still don't understand the essence of your example.

They produce the cars but they are using it as asset to create credit. Dont ask me why they do. Its what they do. They do this because not many people have 60K cash to buy their cars

The credit is the money. In modern economies half the money is credit. Why is this so hard to understand? Not just cars but all over the finance sector

tee-rex

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Activity: 742

Merit: 526

Car finance is just an example of where a bank can create credit w/o deposits. I just picked that because people are familiar with it. You go to BMW to lease a car. BMWFS creates a loan to itself out of thin air. BMW buys the car then rents the car to you. Then They pack these leases together as an asset backed security and these papers are used as money. No deposits required

Why should BMW buy you a car if they can produce it for you? In this example BMW serves as a central bank. I still don't understand the essence of your example.

tee-rex

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Activity: 742

Merit: 526