From micro point of view, it is very natural to think that if everyone's net expense is less than their net income, they will get richer and richer and pay back the debt eventually

From macro point of view, in today's money based society, it is impossible. If the total amount of money at any given time frame is constant, one man's profit is always another one's loss, the net result of the whole nation will be zero (In fact negative, due to frictions in transactions and interests)

In order to let everyone to have a positive result, money available in society must keep increasing. Those money enter society in form of loans, either private, commercial or government loan. So, without loan, no new money, thus no net positive result for the whole economy

Under a gold standard, new money enter the society in forms of freshly mined gold, and it is not created by loan, so no loan is required to increase the money supply. When everyone want to make more money, they just need to dig out some more gold. However in today's system, if everyone want to make some money, they have to take out loans, it is those who take out loans enabled others to make money

If those money never left exchange due to AML rules, then the loss is small, not stolen

FED print 100 dollar, and bought 100 dollar worth of government bonds, and then government have 100 dollar to spend. However, they must make back that 100 dollar plus interest, means the total money in the society will lose $2 when they return that 102 dollar to central bank. So, for each 100 dollar FED print and retrieve, the society as a whole will lose 2 dollar, a temporary stimulation is followed by a even deeper deflation due to less money to spend in future

Even there is no interest charged, this temporary stimulation will increase the incoming and spending of the society for a while, but when it stopped, people are staying at a much higher living cost of everything, with same amount of money in society, thus quickly fall back into recession

The only way out of this deflation spiral is to expand the debt forever exponentially, but then the ballooning interest cost will cut more and more into the income and eventually income will start to shrink no matter how much more debt is raised

Exactly, this put everything purchasable in the current society under the radar of FED, they could buy all the most valuable assets in the whole country. And this is especially effective during a crisis, where everyone want money


CPI does not include assets, central bank could just buy assets without changing CPI. Even better, they are mostly buying debt nowadays, and purchasing debt will create a deflative pressure on the society. It seems a debt financing can raise the consumption for a while, but in the long run, that debt must be paid back by adding interest of almost equal amount of value. The deflative pressure following the debt financing is much harder to deal with, the only way to out is get more debt exponentially or a total default

Use 100 dollar to create 900 dollar debt by FRB, and create base money to buy these 900 dollar debt during a crisis, then you get 1000 dollar base money. Then create 9000 dollar debt using FRB, and then create base money to buy 9000 dollar debt during the next crisis, then create 100K dollar debt using FRB...

The whole scheme is just rooted from a simple practice of issuing base money backed by assets/debts, and use those money to buy more assets/debts.  It seems each step is reasonable, but the result is huge debt and huge wealth gap between banking class and normal people

The quality of the troll posts are dropping

FRB is a practice similar to insurance, as long as there are not so many people withdraw the money at the same time, banks can lend out some of the money to other clients, that is perfectly fine and has been statistically working very well. (Although a little bit cunning) But FRB does not solve a basic problem: Where is the money originally come from

You can open a bank and practice FRB, but with an empty bank you can not do anything, you must first have some customer deposit (real money) before you start to do FRB

Suppose a bitcoin banker have 100 bitcoin, then under a 10% reserve ratio, by lending the same coin out again and again, the maximum checkbook numbers he could create will never exceed 1000 bitcoin, anything beyond that is impossible. In another word, he can not issue IOU endlessly without increasing the base money supply

The only way for him to generate more checkbook money is to get more real bitcoin. If he get another 100 coins, then his check book money could reach 2000 bitcoin maximum, and these extra 100 coins must be mined by the miners with real cost

But in today's financial system, those extra 100 bitcoins are not mined, they are created as base money by using Real Bills Dorctrine principle that I described in detail throughout this thread. With RBD, there is no limitation on how much money that you can create, because it is effectively a double spending, creating purchasing power out of nothing

The difference here: FRB have a limit of 10x more money creation under a 10% reserve ratio, but RBD has no limit



If you look at the M0 money supply of US, it has been increasing very slowly following GDP until 2008, and it suddenly exploded following the start of QE, now it is 5x more than pre-crisis level

If you look at M2 (which measures chekbook money plus base money), the change is quite consistant, thus many people think that the QE works well. But under the hood, the components of M2 has changed: The increase of checkbook money has mostly been stopped following the deleveraging effort from the banks, now their reserve ratio might be as high as 60%. On the other hand, the number of base money increased by more than 3 trillion, if you consider the M2 increased only 4 trillion during this years, that means most of those increase comes from the increase in M0, and when that 3 trillion base money when muliplied later on, can become 30 trillion M2

Lending is another topic, since it involves the risk of default. In your example, the car salesman would not trust a promise from a third party which he has no idea of credibility. Those 80 coins are not considered as money but a debt. Of course you could rely on large institutions, but risk of the failure of those institutions is still high, just look at how many bank failures during the financial crisis. Maybe the risk is very low under normal time, but when it fails the impact is enormous, so the average risk could be higher, you can not minimize the risk by moving them around, actually you increase the risk when you move all of them to a single point of failure

But let's put it aside and start with basics without involving lending. What RBD theory indicated has nothing to do with FRB, it is this part I am most interested in this thread

Have seen this debate since 2011, there is no solution, borrow more is the only way out, and followed by a total default eventually

Greek is just the one to blame, remove Greek, some other country will become the one to blame. With debt based money issuing, there is no way to get a positive return for all the countries in EU as a whole, means they must borrow more and more to finance their debt, without Greek's debt spending, where does Germany's income coming from?

No doubt, it is this logic makes bitcoin a money: If there are enough people who think bitcoin is money, then it is money. So to the end, to make something money is trying to make as many people as possible to believe it is money




If banks strictly follow 100% reserve ratio, they can not borrow you any shell and create deposit numbers, since all those shells would be reserved at central bank, they have no single one shell at hand to lend (In fact that is the liquidity squeeze we have seen in a banking crisis, even they had 10% reserve ratio, banks would still loan out as much as possible and deplete their shell reserve)

But this is FRB, still a small trick comparing with the fact that they could create deposit numbers backed by shell, which is a double spending of shell's purchasing power. Without double spending, the banks ability to create credit money is limited by their shell reserve and multiply ratio, but with double spending, the banks can literally create as much money as they wish. With maybe only one ounce of gold they could acquire the whole world by repeating the process, no FRB needed

Speaking strictly, this is not exactly double spending. Some times when customer withdraw their shell, corresponding deposit numbers on their account must be destroyed, so some of those purchasing power is not duplicated, just like in a FRB system

But banks can prevent this withdraw from happening using many strategies. For example, make the fiat money the only transaction medium, so that when economy expands, the demand for fiat money increases. Another way is to increase the debt of the nation by buying more government bonds, when the debt increases, so increases the amount of money needed to repay the debt. And after removal of gold standard, they have removed the redeem possibility of issued fiat money, means once issued, only central bank have the right to destroy those fiat money by selling assets. This, together with a forever expanding economy, makes the double spending almost a sure thing

If you understand the implication of this double spending practice, then you would easily understand the following quote

"Banking was conceived in iniquity and was born in sin. The Bankers own the Earth. Take it away from them, but leave them the power to create deposits, and with the flick of a pen they will create enough deposits to buy it back again. However, take it away from them, and all the fortunes like mine will disappear, and they ought to disappear, for this world would be a happier and better world to live in. But if you wish to remain slaves of the Bankers and pay for the cost of your own slavery, let them continue to create deposits." Sir Josiah Stamp, President of the Bank of England in the 1920s, the second richest man in Britain.

Next step will be directly confiscating money from accounts: -10% interest means your money at banks get a hair cut by 10%

Obviously, if they print more money, there will be more deflation (more money means more debt, thus more austerity  and less spending), a low inflation rate will make banks keep printing until they bought every assets out there

Indeed, this back to the question of prefer to live in a dream world or real world. Most of the people live in a world that they believe it is

I think it is all related to the perspective: From personal and short term perspective, it does not really matter. But from a nation's or long term perspective, removing the parasite and cancer will definitely help to improve the financial health of everyone

But it is not easy to escape, people were deeply trapped in this cancer from the day when they were born. The removal of it will likely kill everyone's financial life that is dependent on it

It is interesting to discuss what is REAL money

Many people thought that their bitcoins on MTGOX are real, since they could sell them for fiat and use fiat to buy them on MTGOX. But as long as they don't withdraw, those bitcoins are just numbers on MTGOX's database

In fact those coins might have disappeared as early as 2011, and MTGOX were just playing a game of mixed FRB and using new customers deposit to cover the old customer's withdraw

This is very similar to what banks are doing. Bank's settlement network can be regarded as a giant exchange similar to MTGOX, where every people put their fiat in and trading against each other (in fact their goods are not listed on this exchange, banks purely exchange numbers between different accounts)

When you withdraw fiat money on an ATM, you get real money (cash notes and coins). In a system of 100% backing, numbers on your bank account is backed by real money, but in reality, banks all run FRB. And when they are running out of money, they go to FED asking for new money to pay the old customer

Banks will never run out of borrowers, they borrow from each other, and that is their daily business. But since the aggregate real money is limited, no matter what kind of borrowing activity they carry out, they will run out of real money as a whole in a liquidity crisis (liquidity means real money's liquidity), without real money, they go bankrupt

I modify the dinofelis's word a bit here: Bitcoin is "real bitcoin" if enough people think of it as "real bitcoin". You will clearly see this is not true, bictoin is real bitcoin if you can see them on blockchain

Unfortunately, in today's fiat money system, there is no tools like blockchain to let people inspect the flow of real money, they can only believe what banks tell them, only exchange owners (e.g. banks) know how much real money they have.

That is the reason when the banks all had a liquidity problem, they will create a large shock in economy, just like MTGOX did. Unlike MTGOX, their scale is millions of times larger, if they failed, every one on this giant exchange will lose shirt, thus they must be bailed out by FED using real money, and FED's real money as discussed in RBD theory above are in fact created out of nothing, to make the whole scheme even more unreal

If you have never seen a fork happening here around 2013, then your have every reason to fear. But most of the major drivers of bitcoin nowadays have went through that fork during 2013. Devs and pool owners showed their ability to handle a crisis situation (an unintended fork) in a couple of hours and it is that kind of professionalism and conservative approach that you seldom see in enterprise level gives us confidence of the upcoming fork

What's wrong with their site? It seems https://mycoin.hk/  is still running, did anyone call their number?

This is a very interesting phenomenon worth debating

In traditional economy, people tends to think that more efficiency means more production for given resource, and more production will bring more wealth. When many people first learn about bitcoin, they focus on how to produce it from a manufacturing point of view. Thus comes so many companies trying to build miners and mine coins. For these people, the exchange rate of bitcoin makes it a sell-able goods, they make bitcoin just like make an iphone

Then they learned that no matter how efficiency they are, the daily coin generation is fixed (the quick rise in difficulty and miner efficiency just showed how much excessive production capacity there is in today's society). Then mining becomes a tournament, it is getting harder and harder. As a result the reward gets more expensive, those who paid so much resource to get his reward will not easily sell his coin at a price level lower than his cost, it just does not worth it. They'd rather hold it and wait until the next reward halving to sell at a better price, this is especially true when bitcoin's long term potential can be as high as moon

We also had little panic when that hard fork happened during 2013, but then people realized that a hard fork will not hurt existing coins, only out going transactions. And devs have learned from the previous fork, they will handle it very smoothly so that almost no one feel the difference

And the fork might only happen when the current block limit is approaching and there are lots of transactions never get included due to forever increasing queue

This claim om fraud should be a setup, a small exchange lost 1 millon bitcoin, totally impossible, they might just run some money laundering and blame on bitcoin, and banks surely know all the transaction details of mycoin. It is impossible to claim loss of 300 million dollar without banks knowing all the traces of those money

If mining cost nothing, then the cheapest way to get coin will always be mining, no one will buy, the cost of zero will bring the coin value down to zero. In fact, if the demand rises and there is not enough daily generated coins to satisfy that demand, the mining cost will always rise due to competition. Mining cost is a good indicator for demand, since mining usually is the lowest possible cost to get coins

Value comes also from the fact that it is difficult to do something. Many people spend millions to just win the price of a tournament, psychological motivation is a great part of the value foundation, and for bitcoin many enthusiasts mining at a loss just for fun

In fact there are lots of feed back loops in the valuation of bitcoin, it is even driven by religious behavior, can't use a single profit based model to analyze it. What is the profit to be your own bank? What is the price for realize a dream of freedom?

Commercial bank create large amount of checkbook numbers in their database, but they are not real money, when they run out of real money, they went down, together with your numbers in your accounts, which has never existed in reality until you do a full withdraw. Just like your bitcoin count on bitcoin exchanges, they are numbers in a database, not on blockchain

The focus is not on the price rise and fall of the asset, let's suppose the price never changes. For example, under a gold standard the gold price is fixed at $35 per ounce, you can always redeem one ounce of gold with $35 at FED

It is a double spending problem. When you spend your gold coin, when coin is gone, the ownership of the coin is also gone, you have nothing left. But when you issue fiat money that is backed by your gold coin, after you spend the paper money, the ownership of the fiat money is gone, but you still have the ownership of the gold, until someone redeem it. In fact if no one redeem it, you can spend that gold coin again, this makes it a double spending

In fact, by simply limit the possibility to redeem the gold, you can double the amount of your purchasing power by issuing fiat money. This double spending practice violates the very basic principle of fair trade

When Nixson officially ended the convertibility of gold and USD, all the outstanding USD should have lost their backing and became worthless. The reason they did not crash to zero is just because there is a consensus on USD's value in transaction. So the successful of a double spending really depend on the consensus of fiat money's value

In a game, if you discovered a bug that let you spend the same money twice, you will quickly buy everything you want by simply repeat the process. But in reality, this bug is utilized by central banks world around and it seems no one cares