Fractional reserve banking (maturity mismatch of loans vs. deposits) does not necessarily cause credit expansion. Credit expansion requires that there is at least one fractional reserve instrument that is accepted as a substitute medium of exchange. With Bitcoin there are significant obstacles to this, because unlike with fiat/gold, financial instruments denominated in Bitcoin do not decrease transaction costs. I explain this in the wiki article: https://en.bitcoin.it/wiki/Fractional_Reserve_Banking_and_Bitcoin#Austrian_Viewpoint
I don't agree with this analysis. Any debt instrument has some value with the lack of liquidity and risk taken into account. Rational people wouldn't have any reason to prefer that same number of Bitcoins over the debt instrument. In fact, some people will prefer higher risk and some will prefer lower risk, so some people will rationally prefer the debt instrument over its market value in bitcoins.
Topic: There could be much more than 21'000'000 bitcoins... - page 2. (Read 3577 times)
Fractional reserve banking (maturity mismatch of loans vs. deposits) does not necessarily cause credit expansion. Credit expansion requires that there is at least one fractional reserve instrument that is accepted as a substitute medium of exchange. With Bitcoin there are significant obstacles to this, because unlike with fiat/gold, financial instruments denominated in Bitcoin do not decrease transaction costs. I explain this in the wiki article: https://en.bitcoin.it/wiki/Fractional_Reserve_Banking_and_Bitcoin#Austrian_Viewpoint
Pirate's ponzi scheme is a good example of "perpetuum mobile" that generates bitcoins out of thin air.
No.
“An Indian born economist once explained his personal theory of reincarnation to his graduate economics class,” Paul Krugman writes in the opening paragraph of his Preface to Peddling Prosperity. “‘If you are a good economist, a virtuous economist,’ he said, ‘you are reborn as a physicist.’”
Although the idea could sound good we need to think about possible outcomes. I don't wish "Anti Fractional Reserve Day" to become "Bitcoin Economy Collapse Day".
With every collapse, Bitcoin grows stronger.Not to mention that every collapse is a wonderful investment opportunity.
Although the idea could sound good we need to think about possible outcomes. I don't wish "Anti Fractional Reserve Day" to become "Bitcoin Economy Collapse Day".
While fractional reserve may eventually happen in the Bitcoin economy.
It's already here. I suggest to set a date for "Anti Fractional Reserve Day". During this day everyone should withdraw his/her coins from exchanges, webwallets and similar services to a personal wallet. And deposit the coins back in 24 hours. This "trick" will definitely help us to keep Bitcoin economy "healthy".I love this idea. We should also include fiat deposits in bitcoin exchanges.
Let's do it on 30th September!
While fractional reserve may eventually happen in the Bitcoin economy.
It's already here. I suggest to set a date for "Anti Fractional Reserve Day". During this day everyone should withdraw his/her coins from exchanges, webwallets and similar services to a personal wallet. And deposit the coins back in 24 hours. This "trick" will definitely help us to keep Bitcoin economy "healthy".
That's a good idea. First exchange this should be done to is MtGox. Who knows if they are operating on fractional reserve or not. As far as I know they don't have any publicly available audit data.
people who deposit their bitcoins in a fractional reserve institution will lose their bitcoins at some point. it is inevitable as bank runs on fractional reserve entities are not a question of if but are a question of when.
Right, but that really doesn't matter. People are so risk averse they miss the big picture. Yes, you will suffer the occasional total loss, but it can still be worth doing. Especially when the alternative is a constant slight drag and the probability of total loss is low.A few months ago, I was explaining community credit to a man who owns a grocery store. He brought up the possibility that someone would default on their debts, even someone who had built up credibility through hundreds of legitimate transactions. My conversation with him basically went like this:
Me: Suppose that one out of fifty people did that to you. It would be like one out of fifty people walked out of your grocery store with all their normal groceries but didn't pay a dime.
Him: Exactly. There's no way I could stay in business if that was happening. It would be a disaster.
Me: A lot of your customers pay with credit cards, right?
Him: Yeah. Lots.
Me: How much do you pay on those credit cards? 2%, 2.5%?
Him: Yeah, about that.
Me: 2% is 1 in 50.
Him: *lightbulb goes on*
While fractional reserve may eventually happen in the Bitcoin economy.
It's already here. I suggest to set a date for "Anti Fractional Reserve Day". During this day everyone should withdraw his/her coins from exchanges, webwallets and similar services to a personal wallet. And deposit the coins back in 24 hours. This "trick" will definitely help us to keep Bitcoin economy "healthy".
people who deposit their bitcoins in a fractional reserve institution will lose their bitcoins at some point. it is inevitable as bank runs on fractional reserve entities are not a question of if but are a question of when.
It depends on how those institutions are designed. If they are designed with contractual withdraw limits/time frames and are open about their fractional reserve, paying interest on deposits, and allowing public audits via the block chain, I see no reason why they can't exist.
Yes it can work but it needs that banking attitudes of the prudent banks of the 19th century when the gold standard was used rather than what we seen in banking today, where banks with reckless banking practices are bailed out by the central banks printing more fiat money.
people who deposit their bitcoins in a fractional reserve institution will lose their bitcoins at some point. it is inevitable as bank runs on fractional reserve entities are not a question of if but are a question of when.
Yes this is very true; however most of what Bitcoin replaces in the fiat world is not cash (M0) but funds in bank accounts, credit on credit cards, funds on deposit with Paypal or a similar service, money market funds etc. M1, M2 or higher.
...because of fractional reserve.
So any assessments regarding price of 1 BTC seem to be incorrect. U can't just divide "world economics value" by 21 million.
Pirate's ponzi scheme is a good example of "perpetuum mobile" that generates bitcoins out of thin air. I mean that 500k debt generated 5k every day, and ppl were selling these coins for 50% of their "value".
PS: Not a divine inspiration, just an interesting idea to talk about.
So any assessments regarding price of 1 BTC seem to be incorrect. U can't just divide "world economics value" by 21 million.
Pirate's ponzi scheme is a good example of "perpetuum mobile" that generates bitcoins out of thin air. I mean that 500k debt generated 5k every day, and ppl were selling these coins for 50% of their "value".
PS: Not a divine inspiration, just an interesting idea to talk about.
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