Bitcoin Forum

Step 1:

Create money with no backing out of thin air.

Step 2:

Loan more "money" than what could ever be payed back.

Step 3:

Use "money" to influence government to write laws in your favor.

Step 4:

When money can't possibly be paid back use said laws to confiscate and "repossess" popery and other real tangible assets.

Step 5:

Real profit.

Agree 100% except for one thing. Loan money can never be paid back!!!  ;D

agreed, good post

+ with interest!

This is not exactly what happens. Everything that a central bank does is done in the name of the stability of the economy it is supporting.

essentially that's not incorrect per se, that's why most of the central banking and financy ministry staff might do their work in good conscience. They try to regulate and balance the over-all money supply with their setting of the prime interest rates in the purported best interest for society following the ideas of Keynes (even he would turn in his grave though if he could see how they pervert, i.e. overdo his ideas).

however, what OP criticizes is rather how it all started: monopolized fractional reserve banking, which has always been an opaque practice to put it diplomatically, if not an outright scam.

it is what caused bank runs, and central banks were invented to fix this problem; central banking as an institution is therefore just another case of trying to fix symptoms rather than causes.

Debatable - Do central banks influence the government, or does the government influence central banks?

;D

hiddensecretsofmoney.com

About 2 and 1/2 hours of what you said, in a video format. It's a good watch, in my opinion.

You summarized central banking in the best way possible: 5 simple steps, and they're all correct.

Although, they did make it hard to create your own bank, since now you have to obtain an elusive "banking license" which are really hard to come by, and given to a select few.

Luckily for us, Bitcoin solves that!

I am pretty sure that the government influences the central bank, as the central bank gets it's authority from government.

It wont be long before licences enter the world of bitcoin. :)
http://www.theguardian.com/technology/2014/jul/21/new-york-licence-bitcoin-trading

For businesses, and that can be solved by;
1) Darkwallet, which anarchist will enjoy.
2) Multiple addresses. Large chunks or Bitcoin just get sent to these places, we don't know why.
3) Throw-away accounts on exchanges, some allow you to remove up to $10,000 USD/day without ID, if I'm correct.
4) Moving, albeit annoying.

Probably skipped a few laws, but whatever.

Licenses in New York State don't mean a lot however, since NYS restricts a lot of other things anyway, and it doesn't seem like other states are catching on to the idea. But that could just be my lack of knowledge on the current political climate.

What exchange allows this? All exchanges are suppose to verify a customer's identity prior to accepting any deposits and processing any withdrawals of fiat.

I could very well be wrong, don't take all of what I say at face value.

However, I think some foreign exchanges do this, and I may have seen this on cryptsy, but chances are I read it wrong.

A good alternative, however, would to hire middle-men who aren't affiliated with the company directly, and have the person do it for you, obscuring the companies Identity and creating some small jobs for people to keep busy with.

I think it's a good idea, but it may be declared as money laundering.

I think that you could be prosecuted for money laundering if you try to circumvent AML rules.

I wouldn't think that any banks would do business with exchanges that don't do the KYC process.

A little over simplification on how the system work.

Remember, all deals need to benefit both sides for it to happen. And the local population is not a fool.

Fractional reserve banking allows to create money "on the fly" as needed by the economy. If we removed FRB, then this would likely prevent bank-runs, but without it the economic growth would be hindered. Is there any other automatic means to provide the growing economy with the money it needs that would be as effective?

In recent times, a lot of money is created in the shadow bank industry.   According to guys like Minsky its one of the reason why economy is so fragile.

"Stability creates instability"

Fractional reserve banking is what allows the economy to grow and what allows most people to borrow for things like houses and cars, and to borrow in times of financial emergencies.

I wouldn't say it helps the economy to grow, although in a way it does. It allows for bigger and better numbers, but it also takes away from purchasing power.

And it is sadly what people now have to use when it comes to borrowing those things, it would have been nice if there was a set amount, like what the gold standard had. They did fine before 1971. I don't see what would have changed.

We could very well have a good society where we didn't have to have Fractional Reserve Lending or any of this, especially if it was a full-on libertarian or Peer-to-Peer system.

Jack cuts down a log, sells it to Bill who runs a construction company, for $1. Bill uses the log, and generates $2 from his client. Now, if Jack was in trouble, he could chop down many logs, and earn $5. Bill would use these up eventually, as he would earn $10 in other services or goods from his clients.

(Key thing is that when I show stuff in dollars, I mean in value, not necessarily actual money)

Umm,  err.   There was fractional reserve when we had gold standard.

Your understanding of economics is really naive w that log example

Yeah it was terrible. I knew it was, but I went through with it anyways. Ignore it.

Now that I look back into history, that is a true statement, although I do believe that fractional reserve lending was on a smaller scale back then, and not at the rates banks can lend now. And wasn't inflation pretty low for most of that as well...?

The neoclassical/ mainstream view is that money is exogenous.  i.e money supply is led by reserves.   This could have been gold at one point but later fiat.

The heterodox/ MMT/ post Keynesian view is that money is endogenous . i.e. money created ex-nihilo as credit and reserves are met after.  Credit as money!

Monetarists like Friedman believes The  Central Bank can deal w the economy thru an exogenous money view.   Bernanke increase money supply so that banks increase lending and so on.  However,  we see no evidence of this

This is logical. If you take any field of human activity as an example, getting to the top notch requires more and more fidelity and accuracy, and with each step further slighter and slighter disturbances would make you unstable and could send you back (or even further back than you were at the start).

Sounds legit I want to build a central bank myself  ;D
But in reality that's what Bitcoins for mwahahahha kid.

Anyways no real argument that's pretty much what a central bank is lol.