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March 23, 2021, 04:57:01 PM |
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The problem with bitcoin and coins that are limited by nature - or should I say software is that they cannot use the fiduciary money creation system. As most of you probably know, banks can lend more money than they actually have in reserves. That is, they actually are entitled to multiply money. Simplified example:
Bank "A" has 100 in deposits from clients. The regulation in that country requires a deposit of 20% in the federal or central bank account. Thus this bank can actually give mortgages for 400. (20% -100 so 100% is 400%).
This comes from the centuries old lender's system in which the first "letters of credit" were issues. Lenders soon found out that they could issue more that they had in reserves. You cannot do that on limited issuance digital assets can you?
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