Here is the 2nd part of the response! 
Any BTC lender will soon find that BTC lending will be impossible without putting itself at risk. In nominal interest rates is the inflation component. Considering the approximately 400% inflation that BTC suffered last year, interest rates would feasibly have to be 400% for the lender to cover the risk.
BTCJam also contradicts your previous point that lenders are no longer necessary.
It's been 5 years, and BTC's market capitalization thus demand is a paltry $3 billion. In the free economies where any currency may be used, it should've redenominated them with frightening speed. It didn't. There's a problem, two to be exact: slow and unstable.
No, no ,no. The price depreciation last year had nothing to do with inflation. It was simply a bubble popping out as irrational investors in the beginning overvalued bitcoin and now it's coming back to reality.
The true inflation was only ~10%, which was smaller then previous years 11% and much smaller than the initial one of 30% and so.
There are some variables from the supply standpoint (electricity cost, investment in mining & technology), but inherently bitcoin is
bound to be a deflationary currency!It's price will go up no matter what, because of 1 simple reason: fractions of leftover chunks of money!Because of the supply being limited, currency will be lost slowly, at every transaction there will be chunks leftover like here:
https://blockchain.info/address/1PkKCMw54FpgagP2pzhyPqyBWXtAJshdqZA few satoshis here and there + people will lose access to their accounts, forget passwords ,etc. So these small bitcoins will add up and eventually the bitcoins in circulation will diminish, thus moving the price of it up eventually.
These bitcoins on these addresses will be forever locked there, and will no longer participate in the economy, thus we can easily ignore it, so the circulating bitcoins number will eventually become smaller and smaller, driving the price up.
I guess if you look at it from this perspective the quantity theory of money does make sense, so i`m considering to embrace it from now on, however there is a misconception there between price inflation and monetary inflation, so i`m not agreeing with it 100%.
We can discuss that in another thread though.
Also don't worry about BTCJam, it's a peer2peer loaning system, so they wont go bankrupt. As for the creditors, they should wait until the price goes back, low prices favor loaning, which will increase the economy (most loans go to small startup businesses), and that economy will eventually increase bitcoin's price.
Just the mere fact of transactioning bitcoins and locking out 1 satoshi at every transaction to a unmovable account will eventually drive the price up, so i`m not really scared of this scenario.
If you look at it from this perspective you find out that Nakamoto was really a genius, he thought of everything, probably it took years to plan it out this precisely, because it looks like a masterpiece.
Yes, the US is still cleaning up the mess wrought by its bungling of late 2008. Few would agree that the depressed growth resulting from a hobbled financial system is a good thing.
Credit shrinking further would be a complete fracas.
Cleaning it up wtf? They are putting more gasoline on the fire, NASDAQ at 5000, FED has a much bigger leverage , M3 who knows how big it is, and the banking sector's loan size is enormous, much bigger than in 2008.
So they actually made mess even bigger, they don't plan to shrink the balance sheet, nor to increase interest rates, they will play the cheap money game and eventually create global hyperinflation.
You are free to purchase a car with such price characteristics, but I doubt you'd be pleased with the quality; besides, price per unit quality of automobiles have fallen drastically over time. In fact, with increased productivity, all real consumer prices fall while quantities rise, even the most misunderstood consumer product does:
Not really, plus the parts of the car is also inflating. Even though if the car price would deflate, the iron or whatever materials they create it from is inflating, thus the price will also go up..
You cannot isolate a market from the economy, its all interconnected, the fact that the world runs on the keynesian pyramid scheme affects all markets, even those with the best intention to preserve the purchasing power of consumers will eventually has to rise prices up...
It is solely due to the rapid pace of productivity growth of computation, expressed in Moore's Law. Raw materials have decreased in real terms over the centuries, and quantities have boomed.
I have struggled myself on whether or not to include used goods, but the market is small, so the contribution is small, so I'm not that concerned yet.
Raw materials decreased? How they evaporated? It's not like there is no sand left on earth to make windows. And they can be recycled once they are not used anymore...
The only material that I can think of is oil, but then again we already have a substitute for that (nuclear,wind,geothermal,solar, special algae that produce natural gas), but ofcourse the OPEC cartel is heavily lobbying agains that so it's not like the free market is agains it, but the special interest groups.
Again, we are impoverished without credit, and price stability never produces inflation, but supply stability produces many frequent inflations and deflations.
Hey i`m not 100% agains credits, because somewhere, sometime, people will need it. I`m just saying that it's overhyped and too big, while it also feeds the keynesian ponzi scheme. The only legit credit market would be a 100% reserve market, and then the prices will eventually come down to real demand levels and not artificial ones.
If people will focus more on production rather than speculation, that also adds to the health of economy. In abundance and prosperity the prices are low and everyone is satisfied with their needs, absolutely no need for credit in this economy, only for larger projects perhaps.
But all this student loan, car loan, house loan is just too overexxagerated, and will eventually collapse.
They surely are not. The only possibly perceived beneficiary of a USD inflation is the US government because it borrows almost exclusively in the short term, so it always pays negative interest rates, halving the burden every quarter century or so.
Inflation reduces the real income of banks by an equal rate. The size of their entire enterprise shrinks by that amount. It also hampers growth. Bank owners cannot be pleased with those facts.
Not really, a fractional lending scheme makes them give out enough loans, so that the nominal income from their interest - taxes is always by orders of magnitude bigger than the inflation they cause on society, because the savers will bear the costs as their deposit rate is most likely under the inflation rate, while the consumers pay them in higher prices.
Also the various derivative markets are guaranteed by taxpayer money, so market makers can easily live on comissions, active traders will just buy and hold, and when the market collapses, the nice little tax payer slaves will cover their losses.
So recap the main beneficiaries of the ponzi scheme:
-Lenders (Commercial Banks/Credit insitutions) ✓
-Derivative Traders/Speculators/Investors (Hedge Funds , Pension Funds , or Individuals) ✓
-Derivative Market Makers (Investment Banks) ✓
-Government ✓
-Central Bank ✓
-Tax Payer & Consumer
fuckedThats a very efficient ponzi scheme if you ask me.
Indeed, I am waiting for the show to begin if inflation all of the sudden spikes.
If they had the capacity to produce money properly, at least in this scenario, they would reverse QE and raise interest rates later. The collapse in oil has saved them for now.
Now, they are distracted by the threat of their suicidal QE plans, afraid of the sticks of dynamite wrapped around their issues. They do not see that the US, EU, and Japan are slowly heading towards the feared deflation.
One can't say that government isn't entertaining.
If they do cause another 2008/2009 with their bungling, people will be grasping for any alternative. The Ideal Reserve, with its maximum efficiency, will be ready to soak up all the sudden demand for money.
Well then don't look at government data because its probably made up BS. The real inflation rate in the US is already ~7%, and in some parts of Europe ~15%.
Don't look at gold markets and other ones because they are severely undervalued.So its actually very hard to know the exact figures , but you can see where it will go.
All Central Banks decrease rates, and do QE, just now Poland also joined the club after Sweden, so its beginning.
I`ll definitely hoard up on bitcoins because this will be big!
Also yes the oil collapse saved them temporarly, but funny thing is that it will hurt them in long term, the US domestic oil investments will evaporate, also Russia and other countries having troubles, so jobs will be lost by millions.
They will need to pump oil price back, and that will need a QE4 for for the FED.
Bubbles are good. It's the popping that is not, unless of course if one prefers poverty.
Under price stability, it will almost be a perpetual bubble.
There is no bubble that wont pop, its like putting air in a ballon, that eventually will pop, even if you construct it from the best material, the pressure will always pop it out.
The bubble is just a mirage, and has nothing to do with poverty, in a real economic growth the GDP will grow without bubbles, only in the keynesian world you need huge fractional based credits to do anything.
In a bubble you only have temporary wealth, in a real growth you have lasting wealth (until the keynesians fuck it up again).
That presupposes that derivatives are cheap enough in the first place. Under price instability including especially BTC level instability, they never are.
There is no escape from price instability.
Thats just a stupid statement, you can add 50 decimal places to an insturment and then buy as much as you can with your money. It's not like you can have only integers ...
Also adding decimals to is = increasing supply. You don't increase the supply of it, you just make the purchasable units amount more affordable.
Besides insurance in a deflationary enviroment will also decrease as more and more insurance companies exist.
This is unfortunate BTC wishful thinking that has been the latest hope. The cart follows the horse not the other way around.
Higher level finance is impossible without a stable foundation. BTC is incredibly unstable so cannot provide the stability required for widespread derivatives.
A futures contract denominated in BTC with little to no risk to the market maker will be out of reach of any businessman. If the market maker took the risk, there would soon be no market makers to provide liquidity, thus there would be no derivatives market.
Either way, with price instability, no higher level finance can be built.
As i said earlier, please dont make early assumptions, bitcoin is new, it needs time to adjust.
https://blockchain.info/charts/market-priceAlso i observed a long term trend of decresing daily volatility, despite the incresing number of users.
So my theory is correct,
the volatility is is invesely proportional to the number of users!
Give it 5-6 more years and the price of it will be more stable than the current bond markets
The problem is that you think in this keynesian logic, which is flawed, i dont blame you ,because its been a long time since a legit and transparent market existed, so no wonder people lost their common sense to all this propaganda...
Absolutely not. If banks were required to have 100% reserves instead of the some 10% they are now, there would be no banks. Banking is done on the hairline. Income per unit asset is tiny, and net interest margins are tinier still. If they could not borrow short to lend long, they would lose on every loan they produced.
If BTC had price stability, banks would adopt it because it would have lower nominal interest rates, and nothing except regulation could prevent them from lending it with whatever reserve ratio they wished.
Then they would cease to exist, who cares? Free market eliminates useless units of the economy. Why keep them artificially alive with this ponzi scheme economy when the free market says that they are inefficient?
Also bitcoin has already made them obsolete. Time for p2p lending without capital controls and regulatory BS.
Those supernodes are the traditional financial institutions.
As The Ideal Reserve spreads its wings, lending will naturally sprout. Banks will see that they can have much higher turnover due to the rock bottom nominal rates and coincident higher real rates, and climb over each other to lend it to their customers.
The balance sheet risk free issuance and sub-second processing times that The Ideal Reserve provides will cause financial profits to spike and borrowers to enjoy larger enterprises and homes.
Until The Ideal Reserve circulates, we suffer the existing system.
I`ll follow your instrument's progress, it looks interesting, however I cannot comment it yet until i find out it's mechanism exactly how it works.
But i`m still favoring deflationary instruments though.
The problem would not be the reserve ratios. The problem is always collection. This cannot yet be done in a decentralized way because there is no legal apparatus where the judiciary simply adheres to cryptocurrency rules, and no cryptocurrency can yet hire a lawyer to collect.
You don't have to built that into the protocol. You create a real company with KYC stuff when you want to lend out huge amounts and then you can enforce the loans.
Or for smaller amounts you can do it anonymously with collecting collateral, or just designing some sort of "trust system" whereas if one guy defaulted on your loan, you can give him a "thumbs down", so that others can see that too.
And the more loans they paid back, you can give him "thumbs up" ,there fore people can see which addresses are honest loanpayers and which are not, and set their interest rates and credit size accordingly.
It can be done with a little creativity.
The developed economies have very small reserves for bank lending, and they are about to deflate.
Reserve ratios do not cause inflation.
Ok so now you are confusing me? So you are saying that reserve ratios don't create inflation.
So the fact that I got 1$ and i loan out 1 billion $, and then instead of collecting 1% on 1$, as of 0.01 cent, i collect 10m dollars, I didnt created inflation?
Where did that 999,999,999 dollar + 9,999,999
.99 $ of interest come from? Maybe from thin air, if my memory serves good. Also if the loan is sold in the derivative market to a market maker in exchange for only 1 billion dollar (i dont even want the interest on it), that is counterfeiting 1B $, that is exactly creating inflation.
So please explain it because you lost me on that...
You may be shocked to hear this, but there has to be some way to provide some socialism. If socialism did not exist, most people would live in want. Most people simply do not posses the skills to keep their heads above water, evidenced by the incredible inequity of economic results. It's like sports: only a few play professionally, and they receive all of the rewards.
A government has to at least play ultimate umpire. They definitely should not suit up and play, but force has to be implemented in some sort of mutually agreed upon fashion so that the economy can function. A rose by another name would still use a gun to force you to comply.
Ah c`mon man, dont say to me that you are leftist, so we were arguing here the whole time and turns out that you are leftist?
There is already 9999999 examples of how to take care of the needy or handicapped people in a free market. That is exactly by charities & religious organizations, which ironically is discouraged by the socialist governments.
Instead of robbing people monthly and giving 99% of that money to sociopath politicians and greedy conman, and only 1% of it to the needy, why not free up the markets, and make people give atleast 5% of their income voluntarly to the needy, and 0% to the scammers.
Real needy people will get much more this way. And unlucky people will get more opportunities, alot of homeless people can find jobs and everyone will be better off...
Sounds much more favorable to me.
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