I prefer total price stability.
Over slavery  Sooner or later, people will realize that price stability is only a belief, it has never been realized. Look at all the world currency wildly swing against each other, it is only a best-effort control by central banks, and Swiss central bank just gave up the control and make it swing 40% in a couple of hours But again, comparing to money creation, inflation or deflation or stability are all minor issues, it is the money creation bring the slavery to mankind, not inflation |
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Actually OP's question is simplified, the loans are all long term loans, and they overlaping each other
First year banks make $100 loan, second year banks make another $100 loan, but the repay of the those loans might last until 10 years later. After 10 years, the first loan is paid back, but by that time there are magnitudes more money out there due to loans from third year/forth year and so on...
It is this large amount of money supply out there makes people think that there are enough money to pay back the loan. But OP is correct, every one of these loan has to be paid back by more than originally borrowed, but since they never happen in a same time frame, people seldom have a liquidity problem, but long term wise this makes a sure destinity of exponentially increasing debt
Growth is the key for sustainability of this scheme, if you can continuously issue larger and larger loans every year to pay back the original loan and interest, you can play forever. But if there is no growth, thus no demand for larger and larger loans, then the system will collapse
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Let's make some real calculation: Each month, you borrow $100 to buy food, and those $100 goes to the food company as income, and food company put $100 to bank, and bank loan out $90 (10% reserve requirement) to another borrower, he spend all $90 to buy products from your employer, your employer have $90 income, and he is so generous and gives you all $90 as salary. So, how could you payback your $100 loan with $90 salary at the end of the month?
The reason these examples are stupid is that they assume that one person holds all the money in the world and that value can only be traded using that money. Of course, neither of those assumptions are ever true. Ok, lets assume that 7 billion people holds all the fiat money in the world and value can be traded using those money. Did that change the way how it works? Putting billions of semi-conductor components into a CPU does not change the basic electrics theory that you can prove in a flashlight Yes, because now I can produce something of value and exchange that for money that can be used to pay back the loan (and the interest). If you can do that, the rest 699999999 people will also be able to do that, and every one of them will need more money than they had originally borrowed to do that, that still does not make the ends meet The only way to make your ends meet is someone else going default. With this system running continuously, there will be more and more people going default, thus banks collect one dollar interest from you while lose one dollar from that defaulted guy, the result is still not able to sustain long term wise, since banks also need interest income to operate |
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Price stability optimizes the performance of all nominal prices which in turn secures the financial system and prevents a monetarily-inflicted liability production denial-of-service.
The gold years (pre-Fed) were far more chaotic than the Fed years. It also saw lower rates of growth.
The demand is a practical one, and we should see it expressed in the market capitalization of the only balance sheet secure implementation, the Argus-Nemesis.
These statements sounds more like a political campaign  Here is a better one: "The fiat monetary system is a scam. That system is our enemy. But when you're inside, you look around, what do you see? Businessmen, teachers, lawyers, carpenters. The very minds of the people we are trying to save. But until we do, these people are still a part of that system and that makes them our enemy. You have to understand, most of these people are not ready to be unplugged. And many of them are so inured, so hopelessly dependent on the system, that they will fight to protect it" Value is all relative, stability is an illusion. A good example that price stability has nothing to do with productivity is bitcoin, merchants accept bitcoin payment and pricing can change a lot during a day or a week, but no one feel uncomfortable, they will always find a way to hedge this risk. People are not that stupid that without fiat money they will go back to stone age, no, without fiat money they will feel much better  In fact, a stable price makes all the added productivity goes to money creators. If you make 1000 times more goods, banks will just create 1000 times more money to buy your goods, to make their price stable, how can this total slavery scheme last without being caught eventually Growth has nothing to do with money supply, it is a result of technology advance, most of the modern technologies that widely used today have been developed long before the FED established |
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Strange logic, should world banks all close because they have billions of customer dollar? |
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Trying to learn how existing monetary system works is a waste of time. It is much easier to just start a new monetary system with opposite set of rules and see the difference
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They are even buying corporate bonds, means all-out buying every debt that they can buy (and become the master slaveholder), but since bitcoin is not debt, they might not be interested
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The assumption that there is not enough money to pay back the loans (due to interest or whatever) is stupid. In the fractional reserve example above, and in the more realistic scenario of today with practically no reserves at all, and in the case where the central bank edits its own account balance to provide reserves, there is always a lender for each dollar loaned. Someone always have the counterparty of each dollar loaned. The assumption is just wrong. This is not the same as it is problem free to in fact pay back or require a loan to be paid back; either it is paid back or defaulted on, it will have grave consequences for the participants, the total money volume, and the productive capability of the economy. Of course it is a problem, use the 2008 crisis as an example. Still, you can not say that there is not enough money around to pay back the interest, that is a total misunderstanding of what interest is.
There is not enough money to pay back the loan, money supply must increase exponentially to make the system running, it is a fact, not theory  |
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Let's make some real calculation: Each month, you borrow $100 to buy food, and those $100 goes to the food company as income, and food company put $100 to bank, and bank loan out $90 (10% reserve requirement) to another borrower, he spend all $90 to buy products from your employer, your employer have $90 income, and he is so generous and gives you all $90 as salary. So, how could you payback your $100 loan with $90 salary at the end of the month?
The reason these examples are stupid is that they assume that one person holds all the money in the world and that value can only be traded using that money. Of course, neither of those assumptions are ever true. Ok, lets assume that 7 billion people holds all the fiat money in the world and value can be traded using those money. Did that change the way how it works? Putting billions of semi-conductor components into a CPU does not change the basic electrics theory that you can prove in a flashlight |
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When most anti-bitcoin people talk about bitcoin all I hear is how the price is not stable and it can't be used everywhere yet and not everyone uses bitcoin yet. To me this just shows how much growth potential there is with bitcoin. It shows me how much added value bitcoin will/would have with massive acceptance and usage. To me the fact that the bitcoin economy is growing and it continues to get new developments (think Bitcoin 2.0 world) shows me that it's on the right path to increase in adoption and usefullness.
Why do people see "doomed to failed, because it's not already big", while I see "Has tremendous growth potential, because it's not already big nor the defacto world currency".
All opinions, insight etc is GREATLY appreciated. I seriously have the hardest time wrapping my head around this one.
Bears feel free to flame-on, I'm greatly interested in what you all have to say along with the bulls.
It fails as a currency. It is not price stable or even moderately price stable like the USD. Some cryptocurrencies have linked to the USD, but that is redundant. There's no point for a cryptocurrency that's slower than the USD with its own balance sheet risk since it's not the issuer. Only a cryptocurrency that's faster than cash and totally price stable will win in the end. What is the purpose of price stability? Value is based on supply and demand, the demand does not change much, but the supply has increased so much during latest decades, so everything's value should went down dramatically. However daily consumption's price in fiat is relatively stable, means the value of fiat money also went down together with those goods If use gold as absolute value indicator, then most of the thing's value (including fiat money) went down dramatically during latest 40 years. This suits economy theory much better, since the supply has increased a lot while demand almost unchanged I think the demand for price stability is more of a psychological one, it does not have any real meaning economic wise: I want the bread that I bought yesterday still cost the same today, since that bread does not look different today. I have no idea how much more of this kind of bread has been produced today, and I have no idea how much more fiat money has been produced today, but I just want that bread price to be the same as yesterday! |
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They buy bonds from primary dealers. So what? How else is the money going to enter the private sector?
When you say "buy debt" what are you insinuating? You are trying to claim that this is buying property. It is nothing of the sort.
The problem here is you are looking at money as commodity when you should be looking at it as stock and flow
How is the gold enter the economy under a gold standard? Just dig it out and spend it Similarly, fiat money enter the economy by printing it out and spend it, or simply adding some numbers on bank's account and spend it. Of course central banks will never say that they create money this way, they will use complex terms to make it looks as legit as possible. Real Bills Doctrine is a perfect example of such effort: If all the new money is originally backed by some assets, then normal people will not question the money's credibility |
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Change the 100 pennies to 100 trillion pennies, same principle applies Velocity of money has nothing to do with money creation. You move a dollar one million times between your left pocket and your right pocket, and voila you are now a millionaire You are missing the point which is that money doesn't have to be held permanently to pay debts. In the same year, I can borrow $100 to buy food, and the company that I bought the food from can put that money in the bank to fund more loans. The borrower of that money can in turn buy a product from my employer, the employer can pay me with the profit and I can use that money to pay my debt. The amount of debt, income and expenditure in an economy is not limited to the amount of currency in circulation. If there are only 100 pennies in circulation, that doesn't necessarily mean that a debt of $10 is going to default. Let's make some real calculation: Each month, you borrow $100 to buy food, and those $100 goes to the food company as income, and food company put $100 to bank, and bank loan out $90 (10% reserve requirement) to another borrower, he spend all $90 to buy products from your employer, your employer have $90 income, and he is so generous and gives you all $90 as salary. So, how could you payback your $100 loan with $90 salary at the end of the month? This is an ideal situation that there is no friction and cost during the cycle, and it has not involved interest yet, just a simple trace of your $100 loan. You can see that you will never be able to make the ends meet. Similarly, the society as a whole can not earn more money than it spent, unless the money supply increases constantly, and money supply can only be increased by adding more debt nowadays |
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I don't think I agree with this. If the $100 is printed and we now owe $102 to the fed, then we have even more money printed to pay our debts back and this cycle repeats. Yes debt forever increases (and at a faster rate than the money supply), but all of this printing leads to inflation (dollar becomes cheaper and it takes more of them to buy the same good)...It's only if we stop printing that we would start to have deflation and economic collapse.
Please tell me if I'm wrong or missing something.
Printing does not necessary leads to inflation, since the inflation indicator does not include capital goods, more money will just raise the asset price and bond price. And now more money means more debt, means more of the income will be used to pay the debt, and less money will be used to pay the daily consumption, so there will be deflation even the money printing is accelerating Of course when banks receive the interest, they will spend, which put those interest money back into circulation, but their spending is very limited and could not create much jobb |
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^A d00d whose eyes were opened after watching "Money As Debt" on YouTube?
With a twinge of anti-government paranoia?
And inflated notions of own intelligence vis-a-vis "the masses"?
In MY BITCOINTALK?!!1!
In fact, "money as debt" serials only described part of the banking system which is similar to an exchange, it focused on checkbook money that is created inside banking networks, without discussing the source of all base money creation. Without base money, the credit money can not be created limitlessly, due to reserve requirement "Money as debt II" explained that interest income can be spent by banks back into society, thus make the whole money circulation sustainable. But that is still small details in the banking network, has nothing to do with base money creation Actually the OP's question is about base money creation, it is a fundamental challenge that most of the professors in economy school have no idea about |
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Please bring back my wasted time watching it..
You can stop watching once you see bitcoin |
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No that's not how it works. The Fed is like the blockchain. They are the ledger that's between the public and private sector. Also they control money supply.
I don't think you understand how FOMC works and you confuse securities with property.
If you do not understand who get the ownership of every newly created dollar, then all your knowledge from books are helpless "The study of money, above all other fields in economics, is one in which complexity is used to disguise or to evade truth, not to reveal it." |
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BTW, I pointed this out already: the backing by assets is not necessary to buy up everything. If you can issue money (whether backed or not) the seigniorage can buy up everything if you print enough.
I think it is necessary to have something valuable to back the fiat money. Since banks have to persuade the rich and powerful people to accept it. And usually these people can shake the money's credibility, like those nobles who crashed John Law's paper money 300 years ago You see that happening when Swiss central bank suddenly removed the currency peg against Euro without a notice, since they don't want to be attacked by large speculators. Unfortunately we seldom see those inside fights unless during a financial crisis |
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Of course there can be liquidity crisis in fiat system. We just witnessed one in 2008.
No the Fed does not print money to "buy debt". If you are talking about QE that was to inject liquidity into the system by swapping asset for reserves.
Bitcoin can't avoid liquidity crisis. As a matter of fact it would be more prone to liquidity crisis because of its inelasticity
FED create money out of nothing to buy bonds, in fact, inject liquidity is not a phrase good enough, you can call it holy grace, borrowing from god, or whatever name that looks professional In case bitcoin is not enough for daily use, the value of bitcoin will rise, just like during 2013, large amount of speculative demand drive up the price of bitcoin, there will never be a liquidity problem if 1 bitcoin worth 1 billion dollars The reason why same thing does not happen on fiat money is because central banks keep looking at the demand, when demand rises, they don't allow fiat money's value to appreciate, they print more, increase the supply and suppress its value. And they greatly benefit from a liquidity crisis, since all the new money's ownership belongs to them |
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The money is technically at deposit by the commercial banks at the Fed. They can't loan them out because the creditworthy aren't demanding, and they aren't supplying the uncreditworthy.
With that large of an increase in the supply of money, an inflation would normally be expected, but velocity dropping to record lows prevented it.
People are tapped out after foolishly selling at the bottom of a housing collapse, taking most families source of net worth and transferring it to hedge funds. It's the stock market's turn to make us think we're richer than we really are. We should be hearing more of that over the next few years.
People were forced into default, and that was planned, to transfer the house ownership to banks, and then central banks print some money to buy it to support the house value Anyway all those money are created out of nothing, it is a race between banks playing more tricks and people finally realizing the scam and abandon the currency like what happened in Mississippi bubble. But unlike during Mississippi bubble, now there is no gold convertibility, it is difficult to discredit fiat money at this stage |
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