"The tragedy of investment is that it causes crisis because it is useful.
Doubtless many people will consider this paradoxical. But it is not the theory
which is paradoxical, but its subject - the capitalist economy." Kalecki
As an example, see US net government lending, $Bn starting in 2007:
-354.9 -781.8 -1476.7 -1509.5 -1400.1 -1214.8 -698.3 -681.4 -602.3
So, from 2008 to 2012, some $2.7Tn of excess deficit went into the US economy.
"One of the more enlightening things you learn from a sound understanding of macro is the
Kalecki profits equation which shows that corporate profits are the result of the following equation:"
Profits = Investment - Household Savings - Government Savings - Foreign Savings + Dividends
http://www.pragcap.com/why-hasnt-the-budget-deficit-decline-hurt-corporate-profits-more/
That suggests that the $5.6Tn that the US government borrowed between 2008-2012,
if all other things were unchanged, became profit somewhere in the economy.
And the Stock Market soared. Since then, from 2013-2016, the Stock market has some $2Tn
less in government funded profits, and is presumably buoyed up only because the
Federal Reserve Bank is cornering the market for Lemons.
http://www.nytimes.com/2010/11/24/business/economy/24econ.html
"American businesses earned profits at an annual rate of $1.659 trillion in the third quarter"
http://www.nytimes.com/2010/11/24/business/economy/24econ.html
"Corporate profits have been doing extremely well for a while. Since their cyclical
low in the fourth quarter of 2008, profits have grown for seven consecutive quarters,
at some of the fastest rates in history. As a share of gross domestic product, corporate
profits also have been increasing, and they now represent 11.2 percent of total output.
That is the highest share since the fourth quarter of 2006, when they accounted for
11.7 percent of output.
This breakneck pace can be partly attributed to strong productivity growth - which
means companies have been able to make more with less - as well as the fact that
some of the profits of American companies come from abroad. Economic conditions in the
United States may still be sluggish, but many emerging markets like India and China
are expanding rapidly."
"This breakneck pace can be partly attributed to people getting fired" - FIFY.
Before moving on, note the borrowing requirement in 2007, $354.9Bn, the difference
between spending and taxation, in broad terms, and contrast the values for later years.
You may be curious as to how borrowing got reduced 2013 - 2015? Here are the tax revenues:
2660.8 2505.7 2230.1 2391.7 2516.7 2663 3141.3 3265.2 3434.9 (US$Bn)
The change is accounted for neatly by an increase in taxation in one form or another,
rather than any reduction in government spending.
This seems to be a widespread paradox - "capitalist" economies whose profits are often
entirely funded by governments. Those 2010 accounts are entirely coincidental :-)
Any thoughts on "Helicopter Money" yet? We're getting to the endgame, and the equation above
provides a hint of things that just aren't gonna happen.
Topic: Unrestricted Banking and Problem Banking - page 4. (Read 9763 times)
Just to point the discussion on fraud in the right direction ...
http://edition.cnn.com/2004/LAW/09/17/mortgage.fraud/index.html?_s=PM:LAW
"From Terry Frieden CNN Washington Bureau Friday, September 17, 2004 Posted: 2144 GMT (0544 HKT) Assistant FBI Director Chris Swecker said the booming mortgage market, fueled by low interest rates and soaring home values, has attracted unscrupulous professionals and criminal groups whose fraudulent activities could cause multibillion-dollar losses to financial institutions. "It has the potential to be an epidemic," said Swecker, who heads the Criminal Division at FBI headquarters in Washington. "We think we can prevent a problem that could have as much impact as the S&L crisis," he said."
https://ourfuture.org/20150911/now-the-justice-department-admits-they-got-it-wrong
"By issuing its new memorandum Thursday, the Justice Department is tacitly admitting that its experiment in refusing to prosecute the senior bankers that led the fraud epidemics that caused our economic crisis failed. The result was the death of accountability, of justice, and of deterrence. The result was a wave of recidivism in which elite bankers continued to defraud the public after promising to cease their crimes."
I'm shocked, shocked, to find that gambling is going on in these places.
But you knew all this already (I hope) and could have found these references
in a few seconds with a simple search.
I'm coming to the view that the biggest deception practiced by the banks is
that we need the banks, the bankers, and the financial sector.
There's a simple equation that suggests that TPTB will never allow helicopter money.
I'll post something later, but If you have any thoughts on that feel free to post.here.
http://edition.cnn.com/2004/LAW/09/17/mortgage.fraud/index.html?_s=PM:LAW
"From Terry Frieden CNN Washington Bureau Friday, September 17, 2004 Posted: 2144 GMT (0544 HKT) Assistant FBI Director Chris Swecker said the booming mortgage market, fueled by low interest rates and soaring home values, has attracted unscrupulous professionals and criminal groups whose fraudulent activities could cause multibillion-dollar losses to financial institutions. "It has the potential to be an epidemic," said Swecker, who heads the Criminal Division at FBI headquarters in Washington. "We think we can prevent a problem that could have as much impact as the S&L crisis," he said."
https://ourfuture.org/20150911/now-the-justice-department-admits-they-got-it-wrong
"By issuing its new memorandum Thursday, the Justice Department is tacitly admitting that its experiment in refusing to prosecute the senior bankers that led the fraud epidemics that caused our economic crisis failed. The result was the death of accountability, of justice, and of deterrence. The result was a wave of recidivism in which elite bankers continued to defraud the public after promising to cease their crimes."
I'm shocked, shocked, to find that gambling is going on in these places.
But you knew all this already (I hope) and could have found these references
in a few seconds with a simple search.
I'm coming to the view that the biggest deception practiced by the banks is
that we need the banks, the bankers, and the financial sector.
There's a simple equation that suggests that TPTB will never allow helicopter money.
I'll post something later, but If you have any thoughts on that feel free to post.here.
Banking: The acceptance of deposits, and the provision of, and repayment of,
loans whereby the business transactions normally exceed the Bank's ability to
repay all deposits at any given time.
loans whereby the business transactions normally exceed the Bank's ability to
repay all deposits at any given time.
Interesting how fraud is essentially baked into this definition. This is not a slight on your work, just an observation that the modern state of banking is so warped that failure to balance assets against liabilities is simply assumed.
Banks are going to exposed their bad sides if they use bitcoins. But banks are going to use and exploit bitcoins and we will suffer. It's best if bitcoin and banks will not merge. We want banks to leave us alone. We enjoy independence in bitcoin far away from greedy banks and unfair financial system.
A bank's alleged inability to pay the deposits is not fraud. First, this wouldn't be a problem if the bank could demand to immediately return all the loans it lent out previously (then the bank balance sheet would shrink to the size of its chartered capital). Second, in today's world there is no such problem even if a situation like that could potentially arise...
Since there is always a lender of last resort behind the bank's back
Banking: The acceptance of deposits, and the provision of, and repayment of,
loans whereby the business transactions normally exceed the Bank's ability to
repay all deposits at any given time.
loans whereby the business transactions normally exceed the Bank's ability to
repay all deposits at any given time.
Interesting how fraud is essentially baked into this definition. This is not a slight on your work, just an observation that the modern state of banking is so warped that failure to balance assets against liabilities is simply assumed.
Banks are going to exposed their bad sides if they use bitcoins. But banks are going to use and exploit bitcoins and we will suffer. It's best if bitcoin and banks will not merge. We want banks to leave us alone. We enjoy independence in bitcoin far away from greedy banks and unfair financial system.
Maybe the time has come for ZIRP (Zero Interest Rate Policy). No, really, ZIRP!
As in nobody gets to charge interest. During the Middle Ages, that was they way
things worked. In those days, money was for trade, paying armies, and not much else.
Debasing the currency was a Capital offence, and without interest, banking and
moneylending were niche industries.
So, suppose the artificial divide between those who can and those who can't borrow
at zero interest rates disappears. Well, the first impact would be to credit card
companies and payday lenders. Their business model is trashed. Do dry your eyes
dear reader. There's more.
Banks would have a problem. Eighty percent of their business is mortgage lending,
that would be just before they package the toxic stuff with a wrapper of AA and
flog it to some "sophisticated" pension fund desperate for yield. Did I mention
Ratings Agencies might actually have to work for a living? House prices would fall,
and banks would be out of the mortgage business because they just could not afford
the risks they are currently financing. Banks would be one fifth their present
size, perhaps less, because business would have to replace large chunks of their
debts with equity. If, as a private lender, you get no return on a loan to a
business the loan will not be made, so business will be forced towards retained
earnings and equity.
All this may seem strange when compared with the world today. Companies are using
cheap debt to buy back their shares to boost P/E ratios to push up share prices
to increase the value of management's stock options irrespective of the long
term implications for shareholders. Similarly for other asset price inflation
such as real estate. That, dear reader, is the point. Central Banks are buying
up assets and putting it on your tab. If not onto your tax bill, certainly
out of your pension fund and savings account. They are moving from AAA rated
paper into toxic waste and into monkey dung. Best of all, if ZIRP wasn't just
for the rich and well-connected, there would be no need for a Central Bank.
OK, maybe just a tiny unrecognisable barbaric relic of a Central Bank. Maybe.
One final point: Interest on loans is, in most cases, a business expense. The
business does not pay tax on the interest. Unlike Dividends. So if you invest
in equity you get taxed twice, first by corporation tax, then by income tax.
And guess what, if you have an offshore account, a loan is the way to go.
BTW, I suspect US price inflation will be ~5% by mid 2017
I'm thinking I might go long popcorn, deckchairs, and bicycle clips.
As in nobody gets to charge interest. During the Middle Ages, that was they way
things worked. In those days, money was for trade, paying armies, and not much else.
Debasing the currency was a Capital offence, and without interest, banking and
moneylending were niche industries.
So, suppose the artificial divide between those who can and those who can't borrow
at zero interest rates disappears. Well, the first impact would be to credit card
companies and payday lenders. Their business model is trashed. Do dry your eyes
dear reader. There's more.
Banks would have a problem. Eighty percent of their business is mortgage lending,
that would be just before they package the toxic stuff with a wrapper of AA and
flog it to some "sophisticated" pension fund desperate for yield. Did I mention
Ratings Agencies might actually have to work for a living? House prices would fall,
and banks would be out of the mortgage business because they just could not afford
the risks they are currently financing. Banks would be one fifth their present
size, perhaps less, because business would have to replace large chunks of their
debts with equity. If, as a private lender, you get no return on a loan to a
business the loan will not be made, so business will be forced towards retained
earnings and equity.
All this may seem strange when compared with the world today. Companies are using
cheap debt to buy back their shares to boost P/E ratios to push up share prices
to increase the value of management's stock options irrespective of the long
term implications for shareholders. Similarly for other asset price inflation
such as real estate. That, dear reader, is the point. Central Banks are buying
up assets and putting it on your tab. If not onto your tax bill, certainly
out of your pension fund and savings account. They are moving from AAA rated
paper into toxic waste and into monkey dung. Best of all, if ZIRP wasn't just
for the rich and well-connected, there would be no need for a Central Bank.
OK, maybe just a tiny unrecognisable barbaric relic of a Central Bank. Maybe.
One final point: Interest on loans is, in most cases, a business expense. The
business does not pay tax on the interest. Unlike Dividends. So if you invest
in equity you get taxed twice, first by corporation tax, then by income tax.
And guess what, if you have an offshore account, a loan is the way to go.
BTW, I suspect US price inflation will be ~5% by mid 2017
I'm thinking I might go long popcorn, deckchairs, and bicycle clips.
Now for something bitcoin excels at - Foreign Exchange:
http://www.zerohedge.com/news/2016-06-18/fx-next-market-normalize-after-iex-approval
"That means - for those who do not understand clearly - the Forex market itself is an interbank market where banks trade with other banks, and some non-bank participants such as Hotspot (now owned by BATS). That means, they don't have to worry about Reg NMS or other SEC rules, interpretations, comment letters, or policies. They need only worry about a big lawsuit - and when we say 'big' we mean "FX Big" - just one case so far the fines are up to over $5 Billion. One doesn't need a PhD degree from MIT in mathematics to calculate that if the banks have agreed to pay $5+ Billion in fines, the amount of money they are making in FX fleecing customers is 50x or 100x or 200x that. If you don't understand this logic, ask a class action law firm about settlement math, companies always agree to pay out settlements that are pennies on the dollar what their underlying business generates, otherwise it wouldn't make sense for them to do so."
"In the case of the United States, they practically made retail FX illegal - making it so difficult and cumbersome with so many rules and regulations that it makes any strategy barely profitable. And since the regulators squeezed out decent FX brokers - the only ones left are semi-legit companies that even if there's no default risk, the chances of having a fair shot trading at these firms is minimal."
What would the numbers look like if bitcoin was functioning as the world's
reserve currency. It would need a market capitalisation of over US$21Tn.
That's over $1,000,000 per bitcoin.
What would that mean for transaction fees? Suppose, as an initial guess,
the fee was 0.001, or $1,000 per transaction. At the maximum theoretical
rate of 10 transactions per second, there would be over 300 million
transactions per year, that's $315Bn per year, and just under 1000
transactions per day, or about three times the current peak level.
How much electricity does $315Bn pa buy? At $0.03 per KWh, that's about
three China's. Or 1000x a rational level of electricity consumption.
Taking the above figures for FX, $5Bn x100 = $500Bn, so the transaction costs
are initially, kinda in the right ballpark. It looks like bitcoin could
bring honesty to the FX exchange market for much less than $1Bn per year
in transaction costs. Of course, that excludes the cost of compliance with
all government regulations, a not inconsiderable cost.
The other matter that becomes clear from the above is that bitcoin alone
cannot provide a complete cryptcocurrency solution to the world's needs.
For Bitcoin to succeed, newer solutions must be put in place. Further,
it seems likely that bitcoin will struggle to raise its price above
$1000 per coin. The reason for that is this: if in the example above,
bitcoin reaches $1,000,000 per coin and a market capitalisation of $21Tn,
control over that fortune would be exercised by a mere $300M of electricity
per annum. It would only take an antagonist with access to $1Bn or so to
subvert the entire process. Reduce that for lesser amounts.
It looks like that Bitcoin's role in FX will always be limited.
http://www.zerohedge.com/news/2016-06-18/fx-next-market-normalize-after-iex-approval
"That means - for those who do not understand clearly - the Forex market itself is an interbank market where banks trade with other banks, and some non-bank participants such as Hotspot (now owned by BATS). That means, they don't have to worry about Reg NMS or other SEC rules, interpretations, comment letters, or policies. They need only worry about a big lawsuit - and when we say 'big' we mean "FX Big" - just one case so far the fines are up to over $5 Billion. One doesn't need a PhD degree from MIT in mathematics to calculate that if the banks have agreed to pay $5+ Billion in fines, the amount of money they are making in FX fleecing customers is 50x or 100x or 200x that. If you don't understand this logic, ask a class action law firm about settlement math, companies always agree to pay out settlements that are pennies on the dollar what their underlying business generates, otherwise it wouldn't make sense for them to do so."
"In the case of the United States, they practically made retail FX illegal - making it so difficult and cumbersome with so many rules and regulations that it makes any strategy barely profitable. And since the regulators squeezed out decent FX brokers - the only ones left are semi-legit companies that even if there's no default risk, the chances of having a fair shot trading at these firms is minimal."
What would the numbers look like if bitcoin was functioning as the world's
reserve currency. It would need a market capitalisation of over US$21Tn.
That's over $1,000,000 per bitcoin.
What would that mean for transaction fees? Suppose, as an initial guess,
the fee was 0.001, or $1,000 per transaction. At the maximum theoretical
rate of 10 transactions per second, there would be over 300 million
transactions per year, that's $315Bn per year, and just under 1000
transactions per day, or about three times the current peak level.
How much electricity does $315Bn pa buy? At $0.03 per KWh, that's about
three China's. Or 1000x a rational level of electricity consumption.
Taking the above figures for FX, $5Bn x100 = $500Bn, so the transaction costs
are initially, kinda in the right ballpark. It looks like bitcoin could
bring honesty to the FX exchange market for much less than $1Bn per year
in transaction costs. Of course, that excludes the cost of compliance with
all government regulations, a not inconsiderable cost.
The other matter that becomes clear from the above is that bitcoin alone
cannot provide a complete cryptcocurrency solution to the world's needs.
For Bitcoin to succeed, newer solutions must be put in place. Further,
it seems likely that bitcoin will struggle to raise its price above
$1000 per coin. The reason for that is this: if in the example above,
bitcoin reaches $1,000,000 per coin and a market capitalisation of $21Tn,
control over that fortune would be exercised by a mere $300M of electricity
per annum. It would only take an antagonist with access to $1Bn or so to
subvert the entire process. Reduce that for lesser amounts.
It looks like that Bitcoin's role in FX will always be limited.
I really ought to write something on the origins of money, but
we live in interesting times, so, it's interest that I'm
thinking about.
More precisely, a view on some implications of a rise in the
US Federal Funds Rate, initially, an increase to one percent.
In any normal economy an increase in rates would reflect the
pressures of growth within an economy, and the risk taken by
the investor. A rate rise to one percent suggests that a sick
economy is merely being taken off the critical list and that
it will take some time before normal service can be resumed.
Now that the idea of an abnormal economy is shimmering in the
distance like a mirage, let's approach a little closer and try
to see more clearly. Take a look at the money in your wallet.
The paper money bears a promise to pay. The "money" in your bank
account, not so much. When I think about it I realize that 99%
or so of the world's reserve currency looks very similar to a
gigantic alt cryptocurrency.
Now, imagine that you are the developer of the alt currency
known as the dollar. What about that rate rise mentioned
earlier? Holders of bonds and stocks are about to lose money
running into trillions. Still feel like raising interest rates?
Maybe that interest rate can be kept near zero a little
longer. But what happens to liquidity preference - money that
is easily traded carries a lower interest rate? That's the
reason people prefer dollars to gold, given similar rates of
interest paid - dollars are easier to exchange for goods.
Hmmmm ... soooo, what about bitcoin? It may not pay interest
but it's been appreciating faster than gold vs the US dollar?
Let me put it like this, if I lived in the Middle East and had
oil to sell, bitcoin would be my first preference ;-)
There's a lot more to be said about interest, and why profits
are not flowing into the pockets of savers, but that's a topic
for another day.
we live in interesting times, so, it's interest that I'm
thinking about.
More precisely, a view on some implications of a rise in the
US Federal Funds Rate, initially, an increase to one percent.
In any normal economy an increase in rates would reflect the
pressures of growth within an economy, and the risk taken by
the investor. A rate rise to one percent suggests that a sick
economy is merely being taken off the critical list and that
it will take some time before normal service can be resumed.
Now that the idea of an abnormal economy is shimmering in the
distance like a mirage, let's approach a little closer and try
to see more clearly. Take a look at the money in your wallet.
The paper money bears a promise to pay. The "money" in your bank
account, not so much. When I think about it I realize that 99%
or so of the world's reserve currency looks very similar to a
gigantic alt cryptocurrency.
Now, imagine that you are the developer of the alt currency
known as the dollar. What about that rate rise mentioned
earlier? Holders of bonds and stocks are about to lose money
running into trillions. Still feel like raising interest rates?
Maybe that interest rate can be kept near zero a little
longer. But what happens to liquidity preference - money that
is easily traded carries a lower interest rate? That's the
reason people prefer dollars to gold, given similar rates of
interest paid - dollars are easier to exchange for goods.
Hmmmm ... soooo, what about bitcoin? It may not pay interest
but it's been appreciating faster than gold vs the US dollar?
Let me put it like this, if I lived in the Middle East and had
oil to sell, bitcoin would be my first preference ;-)
There's a lot more to be said about interest, and why profits
are not flowing into the pockets of savers, but that's a topic
for another day.
Getting the economy going? That's partially answered by my post, above, but
I'll open a new topic. "Getting the Economy Going"
I'll open a new topic. "Getting the Economy Going"
Unrestricted banking for me is what bitcoins offers today, bitcoin has a blockchain which is the bank, with it being centralized we can monitor our transactions transparently, with its low cost banking it can attract lots of people especially in the other country to do their remittances thru bitcoins.
Maintaining account balances and facilitating transfers is just one part of banking.
What about lending and getting the economy going. Bitcoin has not played a part there.
The question about third party risks got me thinking about identifying
the risks that gold and bitcon face. Why prefer one over the other given
that they share similar adavantages and yet are so different physically?
One objective method is to look at the price volatility for each. More
volatility suggests higher risks. I haven't pursued this in any detail because
any derived figures will give a false sense of accuracy. There is enough
there though, IMHO, to suggest that both gold and bitcoin face similar
levels of risk. Despite their different track records, for example 3000 years
vs seven years in circulation, it seems probable that a big chunk of the risk
to their price, if not existence, comes from one part of the economic system
itself.[1]
To understand this threat, think about the purpose of money outside its
ability to provide a store of value. Its real value is its ability to
circulate, to act as the invisible hand that guides people to act in their
own best interests. It does this by providing a medium within which markets
have a near frictionless operation. Except that both gold and bitcoin
barely circulate as money - it seems that Gresham's law in in full flood
with bad money driving good coin out of circulation.
At this point I will say that there are other risks to bitcoin and to
gold. All of these are the subject of daily speculation and chatter.
Here, this quotation seems particularly relevant "talk is cheap,
show me the code" - earlier I pointed to some banking practices that
bring serious problems, and to recent work in Complexity to try to
better understand these risks. Here I want to take a more global
view of the economy, the role of banking within this, and to get
a glimpse of The Powers That Be. Some links, but see the video:
https://www.youtube.com/embed/NgbqXsA62Qs
http://independenttrader.org/global-structure-of-ownership-result-of-4-year-long-research.html
"Some time ago I posted an article about methods used by banks to influence and govern the world. Some of you may have put that between conspiracy theories. For proving my point I got my hands on very interesting report. 'The Network of Global Corporate Control'. Prepared by Swiss organisation lead by James Glattfelder and Stefano Battistona. Since 2007 till 2011 they investigated capital connections from 43 thousand global corporations. Below I present their results."
http://www.wired.co.uk/news/archive/2014-06/03/james-glattfelder
"This is something that shouldn't be there if you look at standard or classical economic theory."
The phrase used by Glattfield to describe the network is "The Bow Tie".
This is not a particularly good or useful description, but the method has the
benefit of at least some mathematical certainty. The Bow Tie exists, and it is
both a risk and an opportunity for bitcoin, for gold and for assets with a
similar exposure to the vagaries of financial irresponsibility.
This is already old news, and the rabbit hole is getting deeper
all the time ...
[1] Yes, gold doesn't halve, cut me some slack here ...
the risks that gold and bitcon face. Why prefer one over the other given
that they share similar adavantages and yet are so different physically?
One objective method is to look at the price volatility for each. More
volatility suggests higher risks. I haven't pursued this in any detail because
any derived figures will give a false sense of accuracy. There is enough
there though, IMHO, to suggest that both gold and bitcoin face similar
levels of risk. Despite their different track records, for example 3000 years
vs seven years in circulation, it seems probable that a big chunk of the risk
to their price, if not existence, comes from one part of the economic system
itself.[1]
To understand this threat, think about the purpose of money outside its
ability to provide a store of value. Its real value is its ability to
circulate, to act as the invisible hand that guides people to act in their
own best interests. It does this by providing a medium within which markets
have a near frictionless operation. Except that both gold and bitcoin
barely circulate as money - it seems that Gresham's law in in full flood
with bad money driving good coin out of circulation.
At this point I will say that there are other risks to bitcoin and to
gold. All of these are the subject of daily speculation and chatter.
Here, this quotation seems particularly relevant "talk is cheap,
show me the code" - earlier I pointed to some banking practices that
bring serious problems, and to recent work in Complexity to try to
better understand these risks. Here I want to take a more global
view of the economy, the role of banking within this, and to get
a glimpse of The Powers That Be. Some links, but see the video:
https://www.youtube.com/embed/NgbqXsA62Qs
http://independenttrader.org/global-structure-of-ownership-result-of-4-year-long-research.html
"Some time ago I posted an article about methods used by banks to influence and govern the world. Some of you may have put that between conspiracy theories. For proving my point I got my hands on very interesting report. 'The Network of Global Corporate Control'. Prepared by Swiss organisation lead by James Glattfelder and Stefano Battistona. Since 2007 till 2011 they investigated capital connections from 43 thousand global corporations. Below I present their results."
http://www.wired.co.uk/news/archive/2014-06/03/james-glattfelder
"This is something that shouldn't be there if you look at standard or classical economic theory."
The phrase used by Glattfield to describe the network is "The Bow Tie".
This is not a particularly good or useful description, but the method has the
benefit of at least some mathematical certainty. The Bow Tie exists, and it is
both a risk and an opportunity for bitcoin, for gold and for assets with a
similar exposure to the vagaries of financial irresponsibility.
This is already old news, and the rabbit hole is getting deeper
all the time ...
[1] Yes, gold doesn't halve, cut me some slack here ...
Regarding gold and the Black death, to some extent it depends on whether the contract was for a specific weight of gold or for, say, gold coin
As an aside, gold (silver) coins in medieval times were worth the amount of gold (silver) contained, so it is irrelevant. You could take a nugget to the royal mint and stamp royal coins for a small fee. If the court debased the coin (i.e. diminished the content of precious metal), its real worth would still equal the actual amount of precious metal it contained. In other words, you wouldn't buy with such a coin more than you would buy with just a piece of gold or silver. On the other hand, the devaluation of gold itself meant the devaluation of coin as well...
And the pound sterling meant just this, i.e. one pound weight of sterling silver
Unrestricted banking for me is what bitcoins offers today, bitcoin has a blockchain which is the bank, with it being centralized we can monitor our transactions transparently, with its low cost banking it can attract lots of people especially in the other country to do their remittances thru bitcoins.
Hmmmm .... is an Act of God a "Third Party Risk"? I'd need to read the contract :-)
But the same thing could happen to Bitcoin. It's not a Third Party Risk
But the same thing could happen to Bitcoin. It's not a Third Party Risk
Okay, but then you should admit that your concept of money as something free of third party risk is lame at best, since it is not free from risk as such while the outcome is essentially the same (i.e. devaluation of money)...
Which seems to have been your point
If I agree to pay you a pound of silver, there are only two parties
So, if silver loses its value (against what you can buy with it) due to various factors, it can't be considered as a third party risk, right? But what is it then, force majeure?
Would you continue to consider it as money when, in fact, it may have stopped being it?
Regarding gold and the Black death, to some extent it depends on whether
the contract was for a specific weight of gold or for, say, gold coin.
Hmmmm .... is an Act of God a "Third Party Risk"? I'd need to read the contract :-)
But the same thing could happen to Bitcoin. It's not a Third Party Risk.
BTW, I'm not a lawyer, and this is not legal advice.
the contract was for a specific weight of gold or for, say, gold coin.
Hmmmm .... is an Act of God a "Third Party Risk"? I'd need to read the contract :-)
But the same thing could happen to Bitcoin. It's not a Third Party Risk.
BTW, I'm not a lawyer, and this is not legal advice.
If I agree to pay you a pound of silver, there are only two parties.
If I agree to pay you a pound of silver via a promissory note underwritten
by a third party, there are three parties to the contract. You and I rely
on the goodwill, reputation, full faith and credit etc of a third party in our
contract.
If I agree to pay you a pound of silver via a promissory note underwritten
by a third party, there are three parties to the contract. You and I rely
on the goodwill, reputation, full faith and credit etc of a third party in our
contract.
Suppose I agree to pay you one pound of silver around 1850AD, and I give you a "Pound Note" payable
in 2016 by the British Government. Your "Third Party" is the British Government. Good luck suing them
in 2016 by the British Government. Your "Third Party" is the British Government. Good luck suing them
Okay, you pay me in gold for something circa 1345. In a few years the Black Death kills half of the European population. There is a devastating famine all over the continent soon thereafter, and gold loses 90% of its value. Now with your gold I can only buy 1/10th of what I could have bought just a few years ago...
Does this constitute a third party risk?
"Such risks are broadly defined as arising from a contract between parties where one (or more) party breaks the
contract."
contract."
How can such a risk be a third party risk when a party to the contract breaks the contract (what follows from your definition)? This is not a third party risk by any means, it is a direct risk of the other party not fulfilling its contract obligations
"Such risks are broadly defined as arising from a contract between parties where one (or more) party breaks the
contract."
Suppose I agree to pay you one pound of silver around 1850AD, and I give you a "Pound Note" payable
in 2016 by the British Government. Your "Third Party" is the British Government. Good luck suing them.
Ok, maybe I'm missing something, how do you counterfeit gold? Pass off 0.998 purity instead of 0.999?
I think you mean something else, and theft is theft whether by force or by fraud. I think once you try to
be specific, you will fail.
And you think that Bitcoin cannot be stolen by force or fraud, I think the risks are higher there.
contract."
Suppose I agree to pay you one pound of silver around 1850AD, and I give you a "Pound Note" payable
in 2016 by the British Government. Your "Third Party" is the British Government. Good luck suing them.
Ok, maybe I'm missing something, how do you counterfeit gold? Pass off 0.998 purity instead of 0.999?
I think you mean something else, and theft is theft whether by force or by fraud. I think once you try to
be specific, you will fail.
And you think that Bitcoin cannot be stolen by force or fraud, I think the risks are higher there.
Thereby, I conclude that you should exclude gold (and silver, for that matter) from consideration as true money since they are liable to counterfeiting, i.e. to third party risks. On the other hand, digital fiat, like Bitcoin, can't be counterfeited, so it does meet the requirements of what you consider as money. Otherwise, you should clarify what you actually mean by a third party risk, and how it is related to your concept of money...
I simply can't fathom how violation of a contract by a party to the contract can be deemed as a third party risk (emphasis added)
I simply can't fathom how violation of a contract by a party to the contract can be deemed as a third party risk (emphasis added)
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