Didn't watch the video, but most of the fiat money in our bank accounts isn't physical either.
When the head of the national bank in my country (that prints money) was asked how much there was of our currency, his reply was: "In actual physical currency, such as bills and coins, about 100 billion. In total? There's really no way of knowing."
With USD, the M2 money supply is estimated 10.6 trillion USD, while the monetary base is only 3 trillion USD.
It will be interesting to see if bitcoin ever develops a fractional banking system and an M2 money supply. I don't think it's possible, unless bitcoin becomes inflationary instead of deflationary.
This will be BTC's biggest problem. An economy without a fractional reserve system is impossible. From payday loans to mortgages, people need to borrow money, and as soon as a loan occurs, the total money supply is increased. And without any entity to control the M1 supply, BTC will be subject to wild valuation swings as the economy goes up and down.
As much as people don't like it, there's a purpose behind the national banks printing money out of nowhere.
Its time for you to go back to school. You've been brainwashed.
Loan does not have to come in a form of fiat money (printing it out of thin air). Do you really think Bank "loans" you money to buy your house? No they're just working around the deeds and boom, you're the new owner.
Maybe you need to go back to school.
Yes, a loan doesn't depend on fiat money. Never said it did. The issue is how much gets borrowed and lent.
When an economy goes down, people get conservative. When people get conservative, they borrow less and lend less. When the economy goes up, the opposite happens. This impacts total money supply as when people lend more, there is more money floating around (ex: Person A has $100, they lend $90 to person B, so now there's $190 worth of money).
Hypothetically, lets assume the following:
-When an economy is strong, there are 20 dollars floating around for every actual dollar printed.
-When an economy is weak, there are 10 dollars floating around for every actual dollar printed.
-An economy needs $200 of money floating at all times around to properly function.
The advantage of fiat is that a government can increase or decrease the money supply (buy buying or selling bonds) in order to keep prices stable. If the economy is weak, they can print $20, and the economy will be fine (20 x 10). When the economy gets strong, they sell $10 worth of bonds (and pull $10 out of the market), and the economy will still be fine (10 x 20).
The problem with BTC is that it cannot do this. There will be a set number of BTC in existence. So every time the economy does something other than remain stable, you're going to have major problems as companies try to react to a currency that's flying across the board. Think of places like Brazil where they have to change their prices daily/weekly (though you may see price decreases as well as increases). Not to mention that we would be in a depression right now if it wasn't for the ability of fiat governments to massively print money in 07/08.
BTC can thrive as a gold like commodity, but it's not going to replace fiat any time soon. The one thing you absolutely never want in an economy is a supply restriction on money, and this can easily happen in a BTC economy. You're far too blind to the positive aspects of central banks in your thinking.
