Bitcoin Forum

http://ozziecoin.com/index.php/fractional-reserve-banking-explained

I like your article and I think that most of us around these forums understand the problems with fractional reserve banking, however if someone else is interested in your coin I think that's a good place to start to understand the problem with centralized banking.

Here is a major problem that exists....Most of these alternative coins that are pre-mined or are centralized are now regarded as complete scam coins that are/were made in order to make the creator of the coin rich. I'd suggest tearing down your current coin infrastructure and re-building ozziecoin as a true altcoin that is not pre-mined or centralized. If you promote it well and continue to develop the coin and its public relations you will be well off anyways (as long as you have an early investment in it yourself).

Do the cryptocurrency community a favor and help put an end to these pre-mined/centralized coin scams.

The fact is when I walk around in a shopping centre, I see hundreds if not thousands of people who have zero interest in mining.  Why should miners have the total benefit of newly minted coins?

It's true there is a huge element of trust in the person holding the pre-allocated coins, that's why we will have a transparent, independent system of checking that all the pre-allocated coins have been given out fairly.

I want the distribution of cryptocurrency to the majority of Australians to happen within my lifetime.

BTW, I did not post here to get more miners to mine my coin.  I posted the info here to provide a simple effective explanation of what is happening to the economies of developed nations.

The gini coefficient is getting worse and will continue to deteriorate for as long as fractional reserve banking exists.

If you are an Aussie, get behind this effort and claim your ozziecoins: http://ozziecoin.com/index.php/distribution/distribution-zone.

Then give some out to your non mining mates, who have no idea what bitcoin is.  Just email them some ozziecoins.  Easy as. They will learn about crypto with ozziecoin then graduate to the big leagues of investing in bitcoin.  

Bitscan article on ozziecoins here: http://bitscan.com/articles/exclusive-the-new-digital-coin-sent-via-email

Please note this coin has zero value.  We have not listed on any crypto exchange because we are not interested in pumping and dumping.  

Ozziecoin is the "training wheels" for normal, everyday Aussies who want to learn about cryptos without dealing with all the complexities of wallets, mining, and bitcoin addresses.

It costs zero money to claim Ozziecoins right now.

This article has conclusions that someone already friendly to these ideas would accept, but completely leaving out all the details about the mechanics of how fractional reserve banking actually works and just asking the reader to accept bullet point #2 without any of the details that happened since 1 is not going to convince anybody outside the choir itself to believe anything.

this world is a rich men's world,not our poor guys.

the rich get richer and the poor get poorer,this is what happening everyday.

I am a big believer of meritocracy not aristocracy.  We need to get the Blockchain to the community asap.  And we also need to start explaining, in simple terms, why in rich countries like Australia there are so many poor people. 

The wealth gap is unsustainable but there is a real solution: insist on being paid with sound money. 

End fractional reserve banking.

Martin Wolf:

"Printing counterfeit banknotes is illegal, but creating private money is not. The interdependence between the state and the businesses that can do this is the source of much of the instability of our economies. It could – and should – be terminated."

http://www.ft.com/intl/cms/s/0/7f000b18-ca44-11e3-bb92-00144feabdc0.html#axzz31KH3P0mX

No mate, you're incorrect on this.  The choir now includes the heads of many central banks:

https://en.wikipedia.org/wiki/Fractional_reserve_banking

Sir Mervyn King, former Governor of the Bank of England said "Textbooks assume that money is exogenous"... "In the United Kingdom, money is endogenous"[27]

Glenn Stevens, governor of the Reserve Bank of Australia, said of the "money multiplier", "most practitioners find it to be a pretty unsatisfactory description of how the monetary and credit system actually works."[28]

Lord Adair Turner, formally the UK's chief financial regulator, said "Banks do not, as too many textbooks still suggest, take deposits of existing money from savers and lend it out to borrowers: they create credit and money ex nihilo – extending a loan to the borrower and simultaneously crediting the borrower’s money account".[29]

McLeay et al. said in the Bank of England Quarterly Bulletin: "This description of the relationship between monetary policy and money differs from the description in many introductory textbooks, where central banks determine the quantity of broad money via a ‘money multiplier’ by actively varying the quantity of reserves."[30]

Former Deputy Governor of the Bank of Canada William White said "Some decades ago, the academic literature would have emphasised the importance of the reserves supplied by the central bank to the banking system, and the implications (via the money multiplier) for the growth of money and credit. Today, it is more broadly understood that no industrial country conducts policy in this way under normal circumstances." [31]


The system has broken down on two levels:

1. The reserve requirement of 10% means that banks can lend out 90% of existing money, which doesn't belong to them.  As multiple rounds of such lending happens within a 12 month period, money is effectively multiplied in the economy.

2. The existence of securitisation and shadow banking has effectively reduced reserve requirements to much less than 10%.  It is probably less than 2.5% once shadow banking is taken into account.

The system is now effectively creating money completely out of thin air.  https://ozziecoin.com/wp-content/uploads/2014/04/The-Bank-of-England-explains-how-commercial-banks-create-mon.mp4

https://www.youtube.com/watch?v=iFDe5kUUyT0
best explains the scam of a system we have today

Put this supporting information in your article at least in some simplified form, because I'm not wrong, your article doesn't explain anything. It sets up a thought experiment about somebody depositing money, then another taking a loan, and boom, you're just saying the bank creates money out of thin air without any explanation. That's basically useless and makes these completely true conclusions look crazy.

I will link to the supporting articles I have posted here.  The banks are creating money out of thin air.  I'm not making that up.  The system IS completely crazy and unfair. You should be pissed about that.  

Most people are not upset about it because they don't know their money has been diluted by inflation and fast rising property prices.  

We should all do our bit to ensure that everyone understands that Fractional Reserve Banking (including shadow banking) must be terminated.  

Imagine borrowing more money from the person that you already owe, just to put a little dent in the interest that will inevitably compound. That's the surest way to go bankrupt, but our government can somehow sustain & never go under???  The US government spends 3 to 4 times more than they earn annually. Wish I could get away with that!

From your website "Ozziecoin intends to list on a cryptoexchange within 3 to 6 months, which will give ozziecoins a fair market value." http://ozziecoin.com/ homepage. You and I both know you will have quite a few pre-mined ozziecoins to cash in for bitcoins when that day comes

You're right: The devs will have a grand total of 0.03% of coin supply that was pre-allocated for the dev team.  Compared to other similar altcoins, we are okay with that.  We put in the time, work and the money to get the Blockchain out to the Australian community.  That is our primary objective and we're going to be transparent on that entire process.

Aussies, we encourage you to mine some ozziecoins and simply email this coin to your non-crypto aware mates, so they learn something about the blockchain and how coins work.  

International people can mine this coin also and register (https://ozziecoin.com/faucet/register.php) to send ozziecoins to their mates in Australia and around the world also.

It's a friendly, free way for ordinary aussies to learn about cryptos.  We are absolutely the training wheels for people wanting to learn about cryptos and do not want to shell out $500 for a bitcoin.

URL for emailing out ozziecoins: https://ozziecoin.com/faucet/default.php (visit with web or mobile device)

Article about ozziecoins in bitscan: http://bitscan.com/articles/exclusive-the-new-digital-coin-sent-via-email

The reason why this happens is because the rich stay within a network to help each other out, like my freinds boss was a dentist owner and his freind sold dental supplies so they worked hand to hand to keep getting rich while the other comeptitors cant compete cause everyone helps each other within there network.  I hope that makes sense.

Nobody gets rich without lifting a finger except lottery winners.

Banks take on a lot of risk to give loans.  If the lender doesn't pay the banks can go insolvent

The bank itself may become insolvent, but the rich people running it maintain their wealth. Ozziecoin's article is fine IMO. My only problem is with pre-mining and the very real possibility of taking the "coins for aussies" and selling for personal gain.

Fractional Reserve Banking naturally exists, and unless it is outright banned (which would be a violation of freedom) it always will exist. Ironically, most debt is based off of banking, and without debt, you have huge currency volatility. Debt ensures future demand which actually stabilizes a currency.

The problem is with US FRACTIONAL RESERVE BANKING which is where money created with through the fractional reserve process is identical to "normal" money, due to a combination of the FDIC and the FED, especially when the FED gets its instructions from the government and from a coallition of big banks, guaranteeing it will lend to both almost infinitely.

Mate: TBTF - it's still there.  http://www.zerohedge.com/news/2014-05-09/tim-geithner-admits-too-big-fail-hasnt-gone-anywhere-and-thats-way-he-likes-it

These are valid concerns.  We acknowledge them.  We are not your run of the mill altcoin creators.  We understand how important this is to the Australian economy.  

Our primary objective is fair distribution.  We will announce a fair transparent checking mechanism on the distribution process after ozziecoin is listed on a crypto exchange.

Ozziecoin was created to touch the 99.98% of Australians who do not own any bitcoins.  This is an initiative to get the Blockchain to the community in a people friendly manner via emailing ozziecoins. It's the first step - we are the training wheels.

We suggest people mine and email these coins to everyone.

We are ok with; one to one lending.  We are NOT ok with:

1. Banks or exchanges like MT Gox that create off Blockchain coins.  This is just FRB in crypto form.

2. Shadow banking type arrangements in its various forms.

If everything stays on the Blockchain, FRB will effectively be eliminated.

I can name at least three groups that get rich without lifting a finger:

1. The aristocracy/landlords

2. The resource owners - oil, water, various monopolies and oligopolies (who are also often owned by the aristocracy)

3. Bankers who basically shuffle paper to create loans and money out of thin air

Seriously, it does not take a genius to calculate credit scores and lend out money.  All that infrastructure was built decades ago.

This happens all the time.  We agree it is totally unfair.  However, fractional reserve banking is worse than that. 

It steals by inflation and fast rising property prices.  Property price growth in Australia has totally outstripped inflation and wage growth over the last two decades in Australia.

It is untenable.

Ha!  You think it's easy to be any of these things?  Keep dreaming.  I own 3 apt buildings and it's a lot of work.  I have to maintain my property, chase down late rent, taxes, stressing about about my mortgages and falling real estate prices.  I deal w all kinds of unexpected sh*t.

If you think its so easy nobody is stopping you from going out and doing the same

Satoshi created BTC out of thin air and convince you all its worth $400.  I don't see anyone here bitching about that.  One thing you don't understand about banking is that loans are risk.  The bank is making money off the interest but they take the risk of credit.  If I default my loan the banks would be stuck w my 3 buildings that I haven't yet paid off the mortgage.  Thats a lot of risk

FRB is completely unavoidable given a somewhat stable currency.

1) Stable currency gives lending less risk, requiring a < 100% reserve requirement.
2) With < 100% reserve requirement, banks can pay interest to depositors while forcing investors to take minimal risk (maximum interest = their interest rate ( 1 - 1/reserve requirement)
3) Investors accept interest for minimal risk originally in the form of bonds/CDs.
4) Since there's minimal risk, bond/CD notes become as effective a store of value as normal money.
5) Merchants begin to accept bonds/CDs in lieu of "base currency" because there isn't any downside to doing so (they were going to buy bonds/CDs anyway because they have minimal risk and provide interest, and accepting bonds/CDs increases the supply of tender available with which to buy merchant's products, increasing demand for merchant's products, creating more sales == more profits).

And a fractional reserve system is born.

Are you a slum lord in Detroit or something?

There's many people here on Bitcointalk (and in society as a whole) who either own rental units or buildings, and nobody shares your opinion.  If you hate chasing down junkies who are late on their payment, then get a building manager.  As for taxes - most of here are presumably adults and file taxes (including tax on rental income).  If you hate doing your taxes then seek a CPA or tax accountant like a normal sane person.


Though if Bitcointalk is any indication - there's always been a minority of money nutters here who think of crazy ways to save money, when they're only stressing themselves out over a few bucks.  

WTF? You going on about.  I own 3 building in Brooklyn.  My point is if he thinks being a landlord is "a guy who makes money w/o lifting a finger", then he is a naive child.  Being a landlord is A LOT of work.

Sorry mate, you do not even rate on the scale of landownership: http://www.businessinsider.com.au/worlds-biggest-landowners-2011-3?op=1

Below those people are the aristocrats.  Below them are other very large land owners.  Then maybe you fit in below them.  Then the ordinary workers who have zero chance of getting anywhere.

Please, less personal insults.  It's a sign of maturity.

It is always so in market economy. The rich gets richer and poor gets poorer. As big companies try to monopolize the market they receive more money. As poor people try to save money they just inflate. It always will be so, until totally new approach of creating money will be released.

You're in luck mate.  We are releasing such a coin: ozziecoin.com (http://ozziecoin.com)

Interesting article and it was easy for me to understand even though English is my second language. Really explained to me what fractional banking is about. Thank you.

Who said I was an aristocrat?  You say landlords don't need to work.  I'm saying they do.

Banks also take risk when they create loans.  There is few instances where people make money without lifting a finger. Maybe BTC speculators can be said to do that.  But they'll tell you they are taking risk as early adopters

You just sound envious

Banks take risk? Heard of TBTF? Give us all a break.  I rest my case. 

So what?  And lots of smaller banks became insolvent throughout history.  Most people rather give bail out than Great Depression 2.0. 

Dont get your point.  You act like FRB is some big secret.  Then you conclude banks make money "without lifting a finger".  Either cause you don't understand what the business is or you're trying to scare suckers into your Ozzie coin

I don't think you understand. Banks do take risk when they make loans, this is true. The problem comes from the fact that the managers/owners of the bank don't take much of that risk, and the laws & regulations that are supposedly making a more stable economy really serve to reduce this risk.

Let me quickly explain how banks work these days: There's three "tiers" really, of ownership that is. Managers, who run the bank, and whose job is basically to make the bank as risky as possible; creditors & investors, whose job is to provide the bank with capital, and depositors, whose job it is to be screwed.
The
Managers try to get the bank to be as risky as possible because with more risk, comes more reward. This causes higher profits for the bank, which means bigger bonuses for him. Then there's the investors and creditors, who get a relatively fixed cut of the bank's profit. Finally there's the depositors, who just get a percentage far less than what the bank is making, even during good economic times. The moment there's a problem, borrowers default. Depositors think they will be out of money, but the government steps in, prints them some money to pay them back. The investors and creditors lose some money, and the managers don't lose anything.

What's the result? Depositors think they haven't lost anything, but in reality they've lost to inflation. Creditors and investors have made a bit more than inflation, but lost most of that profit when the bank experienced problems and the government bailed it out. Over the long run they should end up in profit a bit relative to inflation. And the managers made the most, because they got the bonuses proportional to the profits of the company (like an investor) without taking any of the investors' loss when the company went under.

The dilution of the value of money (inflation) is caused by central banks. FRB is just a multiplier. A central bank could create $100,000 with no FRB or $10,000 with 10% FRB, and the result is the same.

Well the multiplier is out of the control of central banks because it is in private hands. The central bankers admit this themselves.

I don't think printed funds end up in the economy. I think they end up mostly as bank reserves that the Fed pays interest on.

Actually, maybe I'm wrong. Perhaps Banks do lift a pinky. See what they do: http://t.ritholtz.com/bigpicture/#!/entry/53700120025312186c0577e9?origin=http%3A%2F%2Fwww.ritholtz.com%2Fblog%2F2014%2F05%2F6-years-after-financial-crisis-big-banks-are-still-committing-big-crimes (http://t.ritholtz.com/bigpicture/#!/entry/53700120025312186c0577e9?origin=http%3A%2F%2Fwww.ritholtz.com%2Fblog%2F2014%2F05%2F6-years-after-financial-crisis-big-banks-are-still-committing-big-crimes)

FRB is theft in plain sight. Everyone needs to understand exactly how it works. Use the article and inform others.

The answer to this is the Blockchain.  On blockchain = money; off blockchain = not money.

Wealth inequality buddy. FRB steals from everyone except the 1%.

Looks like the opposition beat a hasty retreat from the conversation. They have no evidence.

http://www.ft.com/intl/cms/s/0/7f000b18-ca44-11e3-bb92-00144feabdc0.html


"What is to be done? A minimum response would leave this industry largely as it is but both tighten regulation and insist that a bigger proportion of the balance sheet be financed with equity or credibly loss-absorbing debt. I discussed this approach last week. Higher capital is the recommendation made by Anat Admati of Stanford and Martin Hellwig of the Max Planck Institute in The Bankers’ New Clothes.

A maximum response would be to give the state a monopoly on money creation. One of the most important such proposals was in the Chicago Plan, advanced in the 1930s by, among others, a great economist, Irving Fisher. Its core was the requirement for 100 per cent reserves against deposits. Fisher argued that this would greatly reduce business cycles, end bank runs and drastically reduce public debt. A 2012 study by International Monetary Fund staff suggests this plan could work well."

We say: Use the Blockchain to ensure 100% per cent reserves and zero FRB.  The Blockchain was designed to do this exactly.

Therefore, on the blockchain = money.  Not on the blockchain = NOT money.