It isn't "the same money" vs "not that same original money", rather the amount of money has increased and you still own most of it.
A loan must be the same old money from which it is a loan, otherwise it is no longer a loan.
Topic: Representational Monetary Identity - page 4. (Read 6224 times)
A loan must be the same old money from which it is a loan, otherwise it is no longer a loan.
Let us analyze what happens if we Google Representational Monetary Identity.
All 4 results lead directly to you.
All 4 results lead directly to you.
I hope this discussion will improve that.
< No offense, this is just my opinion >
Does the world need a new phrase "Representational Monetary Identity" to help describe a tired old problem, FRB?
IMO, no.
Does the world need a new phrase "Representational Monetary Identity" to help describe a tired old problem, FRB?
IMO, no.
I'm not offended, although "representational monetary identity" is a concept, not just a phrase---a concept intended to explain fractional-reserve banking, and not only to describe it.
You think we do, and good luck with your project...
Yes, I think we do. We must understand a problem before we can solve it.
OK. This question has intrigued me too. As when I first learned about bitcoin I just assumed that FRB would work. The problem for me now is I just can't see any money-multiplier effect possible.
In FRB 90% of a deposit from person X at Bank A can become a loan to person Y at bank A.
Person Y can then deposit his borrowed money at Bank B. So there are now two deposit accounts with the "same" fiat money. With bitcoin, when a loan is made to person Y the bitcoins follow him to Bank B. Bank A no longer has the bitcoins.
Now you might say that Bank A can pretend to still have the bitcoins just as it would "pretend" to still have the fiat in the form a loan account in a fiat system. However, the latter case works as the FRB system is backed by central banks who can print fiat to supply to Bank A if depositor X wants his money back while the loan to person Y is still outstanding.
In a bitcoin system the central bank would not be able to print bitcoin and would have to source it, from tax revenues perhaps. This is the inflexible part of the BTC monetary base.
In FRB 90% of a deposit from person X at Bank A can become a loan to person Y at bank A.
Person Y can then deposit his borrowed money at Bank B. So there are now two deposit accounts with the "same" fiat money. With bitcoin, when a loan is made to person Y the bitcoins follow him to Bank B. Bank A no longer has the bitcoins.
Now you might say that Bank A can pretend to still have the bitcoins just as it would "pretend" to still have the fiat in the form a loan account in a fiat system. However, the latter case works as the FRB system is backed by central banks who can print fiat to supply to Bank A if depositor X wants his money back while the loan to person Y is still outstanding.
In a bitcoin system the central bank would not be able to print bitcoin and would have to source it, from tax revenues perhaps. This is the inflexible part of the BTC monetary base.
When you say that bitcoins cannot replicate because they are an "inflexible" monetary base, you are saying they cannot replicate because they cannot replicate. To understand why they cannot replicate you must first understand why today's money can.
Let us analyze what happens...
Let us analyze what happens if we Google Representational Monetary Identity.
All 4 results lead directly to you.
< No offense, this is just my opinion >
Does the world need a new phrase "Representational Monetary Identity" to help describe a tired old problem, FRB?
IMO, no.
You think we do, and good luck with your project...
How can that be?
FRB 'expands' the money supply.
Some things really are simple*, and the question is answered now, imho.
*It isn't "the same money" vs "not that same original money", rather the amount of money has increased and you still own most of it.
FRB 'expands' the money supply.
Some things really are simple*, and the question is answered now, imho.
*It isn't "the same money" vs "not that same original money", rather the amount of money has increased and you still own most of it.
OK. This question has intrigued me too. As when I first learned about bitcoin I just assumed that FRB would work. The problem for me now is I just can't see any money-multiplier effect possible.
In FRB 90% of a deposit from person X at Bank A can become a loan to person Y at bank A.
Person Y can then deposit his borrowed money at Bank B. So there are now two deposit accounts with the "same" fiat money. With bitcoin, when a loan is made to person Y the bitcoins follow him to Bank B. Bank A no longer has the bitcoins.
Now you might say that Bank A can pretend to still have the bitcoins just as it would "pretend" to still have the fiat in the form a loan account in a fiat system. However, the latter case works as the FRB system is backed by central banks who can print fiat to supply to Bank A if depositor X wants his money back while the loan to person Y is still outstanding.
In a bitcoin system the central bank would not be able to print bitcoin and would have to source it, from tax revenues perhaps. This is the inflexible part of the BTC monetary base.
In FRB 90% of a deposit from person X at Bank A can become a loan to person Y at bank A.
Person Y can then deposit his borrowed money at Bank B. So there are now two deposit accounts with the "same" fiat money. With bitcoin, when a loan is made to person Y the bitcoins follow him to Bank B. Bank A no longer has the bitcoins.
Now you might say that Bank A can pretend to still have the bitcoins just as it would "pretend" to still have the fiat in the form a loan account in a fiat system. However, the latter case works as the FRB system is backed by central banks who can print fiat to supply to Bank A if depositor X wants his money back while the loan to person Y is still outstanding.
In a bitcoin system the central bank would not be able to print bitcoin and would have to source it, from tax revenues perhaps. This is the inflexible part of the BTC monetary base.
You deposit $1000 and the bank loans out $500 (for example) to make a profit.
If you want to withdraw your full $1000 before the bank has "the same" money, then they have to give you someone else's (not the same) money to cover the other half.
This Fractional Reserve Banking works fine until too many people want their money all at once...
If you want to withdraw your full $1000 before the bank has "the same" money, then they have to give you someone else's (not the same) money to cover the other half.
This Fractional Reserve Banking works fine until too many people want their money all at once...
...or until inflation destroys the currency, or until the country defaults.
Yet the question remains unanswered: how is it possible that the money from a deposit becomes a loan that is both the same and not the same as the originally deposited money? I offer an answer to that question at http://omniequivalence.com/fractional-reserve-banking/ and http://omniequivalence.com/representational-monetary-identity/.
The simplest answer is that bitcoin cannot be debased by Fractional Reserve Banking.
This was not the question. The question was how can the money loaned from a bank account be both the same and not the same as the money from which it is a loan.
You deposit $1000 and the bank loans out $500 (for example) to make a profit.
If you want to withdraw your full $1000 before the bank has "the same" money, then they have to give you someone else's (not the same) money to cover the other half.
This Fractional Reserve Banking works fine until too many people want their money all at once, then...
In America, you can rest assured your account is covered by the FDIC.
This is a bitcoin forum so I am pointing out that bitcoin makes FRB obsolete, which makes this question moot.
FRB enables the duplication of currency (within reserve limits which prove to be a mirage because of central banking which is the achilles heel of fiat systems).
FRB enables the duplication of currency (within reserve limits which prove to be a mirage because of central banking which is the achilles heel of fiat systems).
If you cannot answer how is the replication of money possible, then how can you know that Bitcoin makes it impossible?
(What you call "duplication" I prefer to call "replication" because the exact multiple depends on the reserve requirements.)
The simplest answer is that bitcoin cannot be debased by Fractional Reserve Banking. It is the same in this respect to gold. You cannot have a purely gold-based FRB.
This was not the question: the question was how can the money loaned from a bank account be the same and yet not the same as the money from which it was loaned.
This is a bitcoin forum so I am pointing out that bitcoin makes FRB obsolete, which makes this question moot.
FRB enables the duplication of currency (within reserve limits which prove to be a mirage because of central banking which is the achilles heel of fiat systems).
The simplest answer is that bitcoin cannot be debased by Fractional Reserve Banking.
This was not the question. The question was how can the money loaned from a bank account be both the same and not the same as the money from which it is a loan.
The simplest answer is that bitcoin cannot be debased by Fractional Reserve Banking. It is the same in this respect to gold. You cannot have a purely gold-based FRB.
It is however, possible to build a paper system on top, where loans are made in paper, but the banks retain deposited gold or bitcoins. This is how paper money started in England in the 1600s as gold deposit receipts were used in commercial trade as paper money.
However, the only reason to have a paper (or an electronic) system is to facilitate fast, easy payments (gold is heavy and a hassle to trade with). Electronic systems are needed for remote payments which are essential in a modern economy. This is IMHO why gold will always remain at the sidelines of the world economy, because it is useless for remote payments and probably 99% of the world's payments (by value) are remotely transacted.
Bitcoin on the other hand is excellent at both functions, unable to be debased yet available for fast and remote payments. So the FRB system is unnecessary in a bitcoin economy. Questions of FRB about which piece of paper is "original money" disappear. Gold will always have some value in case of a total systemic collapse, where modern civilization is wrecked. This is very unlikely, so in a bitcoin economy gold will become very much viewed as an industrial commodity like silver is today.
It is however, possible to build a paper system on top, where loans are made in paper, but the banks retain deposited gold or bitcoins. This is how paper money started in England in the 1600s as gold deposit receipts were used in commercial trade as paper money.
However, the only reason to have a paper (or an electronic) system is to facilitate fast, easy payments (gold is heavy and a hassle to trade with). Electronic systems are needed for remote payments which are essential in a modern economy. This is IMHO why gold will always remain at the sidelines of the world economy, because it is useless for remote payments and probably 99% of the world's payments (by value) are remotely transacted.
Bitcoin on the other hand is excellent at both functions, unable to be debased yet available for fast and remote payments. So the FRB system is unnecessary in a bitcoin economy. Questions of FRB about which piece of paper is "original money" disappear. Gold will always have some value in case of a total systemic collapse, where modern civilization is wrecked. This is very unlikely, so in a bitcoin economy gold will become very much viewed as an industrial commodity like silver is today.
Let us analyze what happens in commercial banking (from http://omniequivalence.com/fractional-reserve-banking/ and http://omniequivalence.com/representational-monetary-identity/):
First, we have a deposit. Then, we have a loan of up to a fraction (of 90%) of this deposit. Finally, the borrower can deposit the borrowed money into another bank account, in the same bank or not. Suddenly, the trillion dollar question emerges: is the borrowed money in these two bank accounts the same?
How can that be?
Quote
First, we have a deposit. Then, we have a loan of up to a fraction (of 90%) of this deposit. Finally, the borrower can deposit the borrowed money into another bank account, in the same bank or not. Suddenly, the trillion dollar question emerges: is the borrowed money in these two bank accounts the same?
- On the one hand, the answer is yes: all borrowed money came from the original deposit---so it is that same original money.
- On the other hand, the answer is no: all money deposited into the borrower's account possibly stays in the original depositor's account---so it is not that same original money.
How can that be?
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