Topic: Real money vs debt, and the value of bitcoin. (Mitchell-Innes credit theory) - page 4. (Read 7058 times)

Precisely. What makes bitcoin so much more valuable is the fact that merchants trust them enough to accept them, and more importantly that there is already a big market for them on (trusted) exchanges. My point is that the value of bitcoin comes mostly from the trust that people have in the market. Not so much its intrinsic properties (or the various alt-coins would be of equal value).

Some alt-coins do offer possible improvements over Bitcoin. For instance, PPCoin offers proof-of-stake, which in the long run tends to offer lower energy consumption, lower fees and increased network security. Other examples are Primecoin (proof-of-work with prime numbers) and Anoncoin (first Zerocoin implementation). These experiments may be valuable for Bitcoin by testing possible improvements to it without requiring their implementation on Bitcoin itself. Some day, Bitcoin may implement some of those improvements, or even its monetary value could be transferred to a new Bitcoin implementation via proof-of-burn (in itself another possible improvement). However, given the already rich ecosystem built around Bitcoin and its momentum, in addition to the already established Bitcoin "brand" (thanks to all media coverage so far), it is hard to see any alt-coin competing with it, as you put it, "outside the cryptographic community."

First-mover status. 99.9% of the merchants which accept cryptocurrency will take bitcoins and not alt-coins. The public do not want to see dozens of alt-coins which are a confusing duplication. So, basically, the alt-coins are not recognized as currency outside the cryptographic community.

All the alt-coins also have similar properties as bitcoin. What is it about bitcoin that sets it apart from the clones and makes it so much more valuable?

Money is much older than the state or the church. Just do a little research.

It is usually the creditor that owns the debtor.


If it walks like a duck, looks like a duck, sounds like a duck...


As you already concluded yourself, this is not legitimate ownership.


Central banks take advantage of the confusion between money and its representation, just like commercial banks do. The process is the same: creating money by loaning it.


You never heard it from the FED or the government (understandably), but there are many other people already talking about it for quite some time.


Go research how fractional-reserve banking originated: goldsmiths issuing certificates for gold they did not have. In 1971, Nixon severed the last requirement for gold convertibility there still was, leading us to where we are today.


I am trying to show you the government cannot own the FED since the latter loans money to the former.

What makes people willing to exchange something valuable for gold? It is the monetary properties of gold: its divisibility, homogeneity, durability, etc. The same happens with Bitcoin: society chooses its money according to its monetary utility.

So government owes money to FED, and FED belongs to government, so the government owes money to himself. If the government owes large amount of the national debt to himself, who cares  


Again, if you loan something that does not exist and do not belong to you to someone else, that is fraud


This has nothing to do with the sequence: After the loan, there is money, and there is ownership, who get this ownership and what did they pay for it?


Don't think in the way of loan, that just make it more difficult to see the simple truth. Loan is just a way to exchange the ownership, it does not CREATE the ownership, if some ownership were created out of nothing after a loan process, something must went wrong

To create ownership for something, either you create it by work(plant a flower/dig out the gold), or you rob it (conquer a country). Never heard about that you can get the ownership of something by loan it  


If you have one ounce of gold, you can issue a note that worth one ounce of gold, and that note get a transaction value of one ounce of gold (backed by your gold reserve). No loan involved here. Same, the government can issue notes that worth their corresponding asset without using any loan process. But unfortunately, they don't have this right today, both of the presidents who ever tried to issue government money have been assassinated
http://www.michaeljournal.org/lincolnkennedy.htm


That's true, by this means, government will not have a debt, their net asset value is positive

No, money originates from organized violence. Organized violence (state and church, militarism and patriarchal religion) indebted the people with a tax. This started the economy, the market and the money, which is a derivative of owed taxes. No state - no market - no collectivism and instead of it we find the self-sufficient communities. These are the historic facts. A barter economy beyond the state (organized violence) is Science Fiction. In the rainforest, where organized violence (state and church) is absent, you won't find a market/economy. You'll find self-sufficient communities beyond any business.

But that's begging the question: what makes people willing to exchange something valuable for bitcoins? Answer: the trust that they can trade the bitcoins for debt on exchanges, and that the exchanges are capable of paying said debt.

Money originates from social interaction: it does not originate individually, within the head of a king, no matter how clever.


Owing money makes that money the object of a debt, not itself that debt. Money becomes itself a debt when created by a loan.


What gives bitcoins monetary value is people willing to exchange something valuable for them, just like with any other form of money.

As the Graeber book explains, the product matching problem only exists in an economist's imagination. A much better explanation for why money was developed is that it solves the problem of a state procuring supplies for its army. It works like this: if a state has an army, it also needs to feed and clothe that army. Without a currency, it would require an additional army just to procure the food and clothes for the first army. To solve this problem, the King issues coins to its soldiers, and then mandates that every peasant pays one coin back to the King as a tax. Through such a coinage, the King has created the workforce needed to supply food and clothes for his Army.


That is not really true. The price of bitcoin is backed by the trust in exchange debt. Here's how: I wire transfer MtGox $100 to buy a bitcoin. Now MtGox is in debt to me for $100. I use that $100 USD to buy 1 BTC (which means now someone else is trusting mtgox to hold $100 USD for them). Now I'm trusting mtgox to hold 1 BTC for me (and MtGox is in debt of 1 BTC to me). Now I can withdraw this 1 BTC, and mtgox is no longer in debt to me. But MtGox is still in debt for $100 to someone else, and MtGox will remain in debt as long they have customers.

Now, you could have bitcoins that are in no way backed by debt. But in order to do so, you have to go back to when bitcoins were nothing more than worthless digital blips in a piece of p2p software: blips without a price, blips without value. The only thing that gives bitcoins real-money value is the trust that people have in exchanges to pay back held debt.

Money comes after products and their direct exchange, not before.


1. Money needs not be a product of labor (more on that below).
2. What defines money is not that it substitutes for products, but rather how it does that: with direct exchange products already substitute for products.
3. Money does not merely make exchange easy: in some cases, it makes it possible (more on that below).


The circumstance of money being a product is irrelevant regarding its function as money: its monetary value comes from expressing the exchange value of the products it can buy, not from expressing its own exchange value.


Money is not just a concept: it is an object. Money solves the following, objective problem (http://omniequivalence.com/money-as-multiequivalence/):


As I already pointed out, if accommodation and food had no independently expressible exchange value, then they could not be owed in exchange for labor. This independently expressible exchange value requires money. You are mistaking the expression of a monetary value in accommodation and food with the absence of any concept of money.


On that we agree.

You are putting the cart before the horse. Money is a product substitute to make commerce easier. Those immovable stones enabled single product transactions by representing a product on one side of the exchange. With many food products it is rare to find a buyer with the exact item the seller needs. That is why the concept of money developed - to resolve the product matching problem.

Debt was originally one of labor, for example, where a tenant performed farm-work in exchange for accommodation and food. Only later did it become monetary. A 30-year mortgage is effectively monetizing 30-years of future labor.

Debt does not require money, but it can be monetized and represented by currency. Bitcoin is a currency which has no debt component. It is in no way debt backed.

A fundamental of economics is that only money can buy anything. Additionally, money needs not be a product: there are historical records or people using huge, unmovable stones - not produced by anyone - as money.


Debt is not "simply a promise of future product delivery."

Debt requires money: with non-monetary (direct) exchange, the concept of debt becomes impossible since there is no way of representing the exchange value of the product having its delivery delayed.


The value of money is essentially the value of the products it can buy rather than - despite possibly mistaken by¹ - its own value.

1. Bitcoin makes that confusion impossible.

A fundamental of economics is that only products can buy products (labor, goods, raw materials). A debt is simply a promise of future product delivery.

Money is a place-holder, it facilitates exchange of products by temporarily replacing one product in a transaction. It makes commerce far more efficient because barter relies upon two products in a transaction, whereas money allows for just one. Money needs to be a store of value for future use.

Currency is a structured form of money to make storage, accounting and exchange easier. Government debt can be declared to be fiat currency by government diktat. Bitcoin is a revolutionary currency as it comes with an inbuilt payments system, scarcity, and supports long-distance transactions.

Gold makes good money, as it can't be counterfeited, and might seem intrinsically valuable. However, a kilo of gold can be worth less than a litre of water. It all depends upon the price (desirability) of a product as how much money is needed in a transaction, so products can be arbitrarily expensive...

Debt is the circumstance of owing monetary value to someone, which requires money to express this monetary value as different from that circumstance. Bitcoin is precisely the first form of money unmistakable by debt: with Bitcoin, debt is the circumstance of owing bitcoins to someone, and never those bitcoins themselves.

Just pay attention to whom tells which version.


The government owes it to the central bank, to which it hence belongs.


There is no money before the central bank loans it to the government: it is the act of loaning the money that creates it, hence making the central bank its owner.


It is the loan that creates the ownership: before that loan, there is no money, hence no ownership.


The FED has no money: what it has is the power to loan money that did not yet exist before that loan.


This makes no sense: the government could not loan money to itself.


The difference here is that the money the government owed to itself would be already paid since the debtor and the creditor would be the same.


Again: if the government owned the FED the latter could not make loans to the former.

Now we just need a unit of measure by which to denominate the "debt" and a way to account for past and future debt that is impervious to manipulation.

I think Bitcoin will work well, those who don't have it are indebted to those who have it, problem solved.

And while we are at it let's take an honest look at "Debt" an asset a risk to the lender and a liability to the borrower.

I have seen this video before, the fact that there are so many different versions about how FED works just proved that no one really understand how it works

The most simple way is to look at the ownership of the newly created money

If you don't have the ownership of some money, how can you loan those money to someone else? That would be crime. I can lend you all the money in the FED if I don't need to have the ownership of those money  

Let's do a step by step analysis: When government sell $1 billion asset (bond, since debt=asset in the future) to FED, FED must first have the ownership of that $1 billion money, then government get the ownership of those money from FED, in exchange they transfer the ownership of their bond to FED. Now the FED owns the bond, means they become the creditor of the government

If government issue money by themselves, they would issue $1 billion money backed by their $1 billion worth of assets (bond). But there is a HUGE difference here: They would have BOTH the ownership of the issued money and the ownership of their asset. They spend money to exchange for some products/services, and if someone come back to redeem the money, they give them asset

So, if FED belongs to government, then it does not matter who have the ownership of those bonds, government will own those bonds anyway. But if it is really so, how come they could have that huge amount of national debt owed to FED?