I don't see there is any big difference in FRB in BTC's form: BTC could also be loaned out again and again and people summarize all the loaned out sum together and 1BTC becomes 10BTC deposit impression etc...
The miners acting as central bank, they generate new BTC, they could loan out them to BTC banks and BTC banks loan out them further. The money supply (coin generation) speed is very stable and halv each 4 year
The biggest difference comparing with USD, is that FED change the money supply speed in order to reach price stablility, e.g. the USD should keep its value relatively stable. But BTC money supply speed could not be changed, so the price of BTC changes very fast, and that bring much more difficulty for a loan: You never know how much you gonna pay back when you borrow from a BTC bank
No one, not even the miners, can generate new bitcoins beyond the limits of the protocol. FRB is not possible using actual bitcoins. please check the other post about common misconception about FRB or so called money multiplyer https://bitcointalk.org/index.php?topic=129423.0FRB is: You save (loan) 10 BTC to a bank, since this is a fixed saving, you seldom have the motivation to withdraw before the period ends, so the bank loan out 9 BTC during that period to other people before your saving mature |
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I don't see there is any big difference in FRB in BTC's form: BTC could also be loaned out again and again and people summarize all the loaned out sum together and 1BTC becomes 10BTC deposit impression etc...
The miners acting as central bank, they generate new BTC, they could loan out them to BTC banks and BTC banks loan out them further. The money supply (coin generation) speed is very stable and halv each 4 year
The biggest difference comparing with USD, is that FED change the money supply speed in order to reach price stablility, e.g. the USD should keep its value relatively stable. But BTC money supply speed could not be changed, so the price of BTC changes very fast, and that bring much more difficulty for a loan: You never know how much you gonna pay back when you borrow from a BTC bank
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In reality the time difference between the deposit and the loan is negative. The bank makes the loan first, and then seeks deposits to cover their reserve requirements.
Money is an idea, not a thing. It is not subject to physical conservation laws.
Normal banks could not create money, they either borrow from FED or sell assets to FED to exchange for new money, FED is the only source of new money FED created base money, and that money get loaned out again and again, but adding all the loan happened after that is quite meaningless, it serves the purpose of confusing people  If people discovered that only FED can create money, they will question about who give them that power; but if people have an impression of every bank can create money, then they might accept that as a common sense |
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It's the swiss bank of 21st century
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What if we say like this: You get $10000 dollar for free each month, but you must guarantee that you don't make inflation rate higher! And we tell you that inflation rate is measured by calculating the price of a basket of goods, so please do not buy any goods in that basket with your free money You end up buying a house instead  |
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Printing money and give it to everyone at the same time seems will lift the price of every thing, but that is not exactly true either, since some people will save some of that extra income
Surely some people will save more, but on the whole people will flee from saving in a unit that is being debauched. Unless it can be done in a way that gives credibility to the notion that it will not be done again (highly unlikely) prices will rise by more than the increase in the supply. The existence (or lack of) of alternatives is an enormous factor as well. This is very true, but I think the people's believe in USD is still mainstream |
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And what happens when that $0.90 gets deposited elsewhere?
At any time, there is only $1 in the whole society. If people save it under their matress, it will disappear from money circulation, but if they put it into a bank (lend it to bank), bank will try to loan it out again and again to increase the available money in circulation During that process, lot's of money in imagination created, it seems there are $10 in the whole society in the end, but if everyone want's to take it out, they will drive a bank run almost everywhere In reality only less than 10% of the savings will be withdrawed unexpectedly, so if banks keep 10% they will be fine, but it just shows how much people are addicted to saving |
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Fractional reserve banking is simple. You deposit BTC1 and the bank loans out BTC0.90 of that BTC1 to someone else. That's it. That's how it works.
Yes. But that's not it, it continues: The BTC 0.90 that bank just loaned out will end up as a deposit in some other bank, which keeps 10% of that ( BTC 0.09) and loans out BTC 0.81. This goes on until your 1 bitcoin has become 10 bitcoins. This process is called credit creation and cannot be done by a single bank but only by a banking system. Now the situation is this: There "really" exists: BTC 1. The sum of the deposits people have at banks is: BTC 10. From this it is only a small (but invalid) step to derive that a single bank could just create out of thin air € 1,000 in loans as soon as it has € 100 in reserves. An there you have your misconception.This is a typical accouting fraud, you can not add the same money at different location multiple times, I don't know how that misconception get published in all the financial educational materials for the universities Fractional reserve banking is simple. You deposit $1 and the bank can loan out maximum $0.90 of that $1 to someone else. That's it. That's how it works See this post for details https://bitcointalk.org/index.php?topic=129423.0 |
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Increased money supply will not directly result inflation, because there are two type of requirements of money: 1. transaction 2. saving The first requirement is related to the produced goods and services in the whole society The second requirement is much more complex. It varies a lot. During bad times, people tends to save a lot to deal with the bad perspective. And even during good times, people still save for the uncertain future, and this saving can continue endlessly (seen those people with lot's of heritage?), which dry up the money supply constantly Banks will lend those saved money out, but in bad times, they could not lend that much, even in good times, they have to keep some reserve, saving anyway have an impact on money supply Back to the topic, if everyone get $1000 per month, there will still be some people save part or all of that money, so the inflation will not be that significant Inflation is a difficult topic, because it is dynamic. Technology advance will always create a downward pressure of price and increased money supply will counter this effect Print and give me one thousand dollar, I put it under matress and I can guarantee it won't create any inflation for the society |
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Money isn't wealth. Increased money doesn't result in increased wealth. Money is merely an accounting system. Increased Productivity results in increased wealth. You can't produce wealth by merely changing the accounting "rules". All you are doing is moving wealth from one person to another. The net effect is zero.
This is mathematically correct, but time is missing in the formula, increased money supply normally do not reach everyone of the society at the same time Money is a driven power, it drives activities where it flows. Everyone have experienced this: It is the area with most of heavy investments created most job, and those job will in turn result in more produced goods and services. And this is especially clear in a society with high jobless rate Printing money and give it to everyone at the same time seems will lift the price of every thing, but that is not exactly true either, since some people will save some of that extra income |
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Many people would take $1000 and quit their jobs, maybe most people
Won't be most of the people, only those people with bad paied jobs |
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It's not magic. It is called "fractional reserve banking" and it works like this:
Bank A has $1.
Bank A loans $0.90 to a customer who buys from merchant B, who deposits the money in bank B. Merchant B believes he has $0.90.
Bank B loans $0.81 to a customer who buys from merchant C, who deposits the money at bank C. Merchant C believes he has $0.81.
Bank C loans $0.73 to a customer who buys from merchant D, who deposits the money at bank D. Merchant D believes he has $0.73.
Bank D loans $0.66 to a customer who buys from merchant E, who deposits the money at bank E. Merchant E believes he has $0.66.
Bank E loans $0.59 to a customer who buys from merchant F, who deposits the money at bank F. Merchant F believes he has $0.59.
Bank F loans $0.53 to a customer who buys from merchant G, who deposits the money at bank G. Merchant G believes he has $0.53.
Bank G loans $0.48 to a customer who buys from merchant H, who deposits the money at bank H. Merchant H believes he has $0.48.
Bank H loans $0.43 to a customer who buys from merchant I, who deposits the money at bank I. Merchant I believes he has $0.43.
Bank I loans $0.39 to a customer who buys from merchant J, who deposits the money at bank J. Merchant J believes he has $0.39.
...
In the end, there is actually only $1 split among a large number of banks, but each depositor believes that they have the amount that they deposited and the fact that the depositors can withdraw their deposits at any time confirms it (as long as all depositors don't withdraw at the same time). The total amount of deposits is $9, so even though there is only 1 physical dollar, there are 9 additional virtual dollars which are nearly indistinguishable from the original $1.
Notice there is a time delay between the deposit and loan, so you must specify how long it takes for each step to happen, and all these steps have strict dependency You add up all the money you have made each year in a 20 years period and said that you have made 1 million dollar, and that makes you a millionare!!! |
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Just showed how bank concept is still prevail
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Buyers all around... why dump at least 12,000 coins at market? Liquidity test?
Seems a test, action before a mass purchase |
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The result is this: for every $1 the Fed creates, banks loan (up to) 0.91 + 0.92 + 0.93 + ... = $9
Please explain how come a $1 bill becomes $9 if you just take it out from your pocket and put it back into your pocket 9 times  |
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If you can spot the fallacy, you may be qualified to comment properly on fractional reserve banking.
The riddle assumes that the 9 paid by each of the ladies went into the purchase of the radio.
Note that the riddle doesn't ask you to include the 26 in the cash register for the radio when you "add up" the amounts, which would give you 57 instead of 31.
In reality, one lady paid 8.66 for the radio and the assistant stole 0.34 from her. The other two ladies each paid 8.67 for the radio, with the assistant stealing 0.33 from each.
Now if you add it up, you get 8.66 + 8.67 + 8.67 + 0.34 + 0.33 + 0.33 + 3 = 30. No extra dollar.
In the riddle you are counting the dollar in the thief's pocket twice. Once in the 9 that the ladies each paid (0.34 + 0.33 + 0.33) and again as 1 in the thief's pocket. As I said earlier, that would be like counting that money in the cash register twice, 26 in the cash register and again in the 9 that the ladies each paid (8.66 + 8.67 + 8.67).
Each lady paied £10 and get £1 exchange, so they did pay £9, not £8.667 |
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When there is an established exchange, there will be hedge funds enter to push the price up, price X4 is a typical campaign
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If you can spot the fallacy, you may be qualified to comment properly on fractional reserve banking. Three old ladies go to buy a radio. They go to the shop and buy a radio for £30, each contributing £10. After they have left the shop, the manager realises there has been a pricing mistake and the radio should be £26. So he gives his assistant £4 and sends them off after the old ladies. The assistant catches up with the old ladies. Not having change for £1 and being a bit sneaky, he gives each of the old ladies £1 each and pockets £1 himself.
So, if you add up the £9 each the three old ladies paid, the £1 each the assistant gave them and the £1 the assistant pocketed, you get £31. Where did the extra £1 come from? This works best as a verbal riddle BTW LOL, I read this story when I was 14 and even after seeing the answer I did not really understand I was misled The same goes for money multiplier, they add same money again and again each time it loaned out, and say this is how banks generate money I think all these accounting tricks are used to cover the real criminals that is ongoing, and I'm sure the bankers know what is going on, they just generated several hundred pages of report and no one can discover the problem following their way of counting Sweden let those banks failed after their financial crisis in 90's, and it recovered quickly from recession, maybe that tells some truth |
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 It's clear to see: For each 16 dollar FED created, only $9 get loaned out But still, in the lower right part of the picture, the "broad money" calculation is not understandable for me, this measurement could be useless since it count the same money at different location several times |
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... but they can't artificially hold rates low forever can they? Well perhaps they can if the Fed just keeps expanding the money supply, but that is unsustainable.
Fed is printing money to buy those foreclosed homes (or indirectly, mortgage backed securites), and they keep it as a reserve These homes will worth a little if all goes to the market. But, like FED could destroy money as well, when the economy is fully recovered, they could sell these homes at a later time to cool down the economy (just like they sell the government bonds, home or government bonds, which has higher credit?), |
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