Bitcoin major fail - doesn't allow credit creation (aka deflationary currency)

[FreeMoney]

This leads me to think that it's extremely naive to believe "controlling/steering/regulating" something as complex as the economy of a country or even the world could be successfully accomplished by a group of people, however smart, educated and well-meaning they might be.

I think it could be done if there was some complex emergent system where the better people were at controlling resources the more they were able to control....

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[myrkul]

This leads me to think that it's extremely naive to believe "controlling/steering/regulating" something as complex as the economy of a country or even the world could be successfully accomplished by a group of people, however smart, educated and well-meaning they might be.

Oh, it is. And that's a conclusion any sane person would come to after having read those studies, or possibly even having read of them. But how many politicians read those sorts of things? They don't even read the bills they pass.

What it boils down to is they're either idiots, or evil. I prefer to think of them as idiots, since that allows me to seek a peaceful solution.

[molecular]

This leads me to think that it's extremely naive to believe "controlling/steering/regulating" something as complex as the economy of a country or even the world could be successfully accomplished by a group of people, however smart, educated and well-meaning they might be.

I think it could be done if there was some complex emergent system where the better people were at controlling resources the more they were able to control....

...hmm, something like a market economy based on sound money?

[myrkul]

This leads me to think that it's extremely naive to believe "controlling/steering/regulating" something as complex as the economy of a country or even the world could be successfully accomplished by a group of people, however smart, educated and well-meaning they might be.

I think it could be done if there was some complex emergent system where the better people were at controlling resources the more they were able to control....

...hmm, something like a market economy based on sound money?

Nah. That would never work. We need to let the machine elves make all our decisions for us.

..wrong thread?

[molecular]

This leads me to think that it's extremely naive to believe "controlling/steering/regulating" something as complex as the economy of a country or even the world could be successfully accomplished by a group of people, however smart, educated and well-meaning they might be.

I think it could be done if there was some complex emergent system where the better people were at controlling resources the more they were able to control....

...hmm, something like a market economy based on sound money?

Nah. That would never work. We need to let the machine elves make all our decisions for us.

..wrong thread?

I think this thread should at this point be merged with the "Resource Based Economy" thread

[Crypt_Current]

This leads me to think that it's extremely naive to believe "controlling/steering/regulating" something as complex as the economy of a country or even the world could be successfully accomplished by a group of people, however smart, educated and well-meaning they might be.

I think it could be done if there was some complex emergent system where the better people were at controlling resources the more they were able to control....

...hmm, something like a market economy based on sound money?

Nah. That would never work. We need to let the machine elves make all our decisions for us.

..wrong thread?

I think this thread should at this point be merged with the "Resource Based Economy" thread

Entitle the new thread "Moot Points You Should Never Start a Topic About Here because They Have Already Been Debunked Ad Nauseum"

[myrkul]

I think this thread should at this point be merged with the "Resource Based Economy" thread

It should be noted that I've successfully turned it from a conversation about Zeitgeist Communism into a conversation about Free-market Economics.

[molecular]

I think this thread should at this point be merged with the "Resource Based Economy" thread

It should be noted that I've successfully turned it from a conversation about Zeitgeist Communism into a conversation about Free-market Economics.

haha! noted.

[johnyj]

IMO, Fractional Reserve Banking just works like insurance: 99.99% of the time the saving account will not get a withdraw before the contracted deposit time ends. Since these money are dead money before the deposit period ends, banks try to get some use of it by loaning them out, there is nothing wrong

The problem is that they loan these money out to buy a house, instead of investing in some future projects that could possibly generate some return

The return of buying a house is purely dependant on the house value, it is more like a speculation, it is not sustainable. The investment on future projects are more carefully considered by some experienced entrepreneur and are more likely to generate some return

Another problem is that currently there are really less and less investment opportunities, buying a house becomes an outstanding investment opportunity

Loaning out money to people to buy a house is a big deal, it quickly depleted the savings in the bank, and when house price falls, these loans will generate loss, banks have high risk of going bankrupt, currently they could only depend on FED buying their mortgage backed serurities to keep their life, but this situation will not improve until the savings in bank return to normal. During the next 10 years, there will be more and more savings deposit mature, and there will be less saving go into bank, banks have to borrow money from central bank to buy more time

All these has nothing to do with fiat or BTC, in a BTC bank, FRB could also happen, exactly the same

[justusranvier]

This leads me to think that it's extremely naive to believe "controlling/steering/regulating" something as complex as the economy of a country or even the world could be successfully accomplished by a group of people, however smart, educated and well-meaning they might be.

If only everybody could be convinced of this conclusion we would have finally caught up to what von Mises figured out in 1920.

http://en.wikipedia.org/wiki/Economic_calculation_problem

[Richy_T]

The return of buying a house is purely dependant on the house value, it is more like a speculation, it is not sustainable. The investment on future projects are more carefully considered by some experienced entrepreneur and are more likely to generate some return

Another problem is that currently there are really less and less investment opportunities, buying a house becomes an outstanding investment opportunity

Loaning out money to people to buy a house is a big deal, it quickly depleted the savings in the bank, and when house price falls, these loans will generate loss, banks have high risk of going bankrupt, currently they could only depend on FED buying their mortgage backed serurities to keep their life, but this situation will not improve until the savings in bank return to normal. During the next 10 years, there will be more and more savings deposit mature, and there will be less saving go into bank, banks have to borrow money from central bank to buy more time

All these has nothing to do with fiat or BTC, in a BTC bank, FRB could also happen, exactly the same

Not true. Your home is not an investment (unless you are a dullard). Your home is the place where you live. You can choose to rent or buy. The return on lending the money for a home does not depend on the value of the property but on the income of the borrower. When I was paying the mortgage on my house, the value could have dropped hugely yet I would have continued to pay. It's the idiots who borrow (and the idiots who lend) more than can afford to be paid back that are the problem.

[RodeoX]

As stated before, if there were a market for such instruments they could be done with bitcoin. If you wanted you could even do exotic things like credit default swaps. But who would want such crap.?

[molecular]

IMO, Fractional Reserve Banking just works like insurance: 99.99% of the time the saving account will not get a withdraw before the contracted deposit time ends. Since these money are dead money before the deposit period ends, banks try to get some use of it by loaning them out, there is nothing wrong

The problem is that they loan these money out to buy a house, instead of investing in some future projects that could possibly generate some return

The return of buying a house is purely dependant on the house value, it is more like a speculation, it is not sustainable. The investment on future projects are more carefully considered by some experienced entrepreneur and are more likely to generate some return

Another problem is that currently there are really less and less investment opportunities, buying a house becomes an outstanding investment opportunity

Loaning out money to people to buy a house is a big deal, it quickly depleted the savings in the bank, and when house price falls, these loans will generate loss, banks have high risk of going bankrupt, currently they could only depend on FED buying their mortgage backed serurities to keep their life, but this situation will not improve until the savings in bank return to normal. During the next 10 years, there will be more and more savings deposit mature, and there will be less saving go into bank, banks have to borrow money from central bank to buy more time

All these has nothing to do with fiat or BTC, in a BTC bank, FRB could also happen, exactly the same

I don't think so, because: BTC Banks cannot borrow Bitcoin from a central bank to buy more time.

[molecular]

As stated before, if there were a market for such instruments they could be done with bitcoin. If you wanted you could even do exotic things like credit default swaps. But who would want such crap.?

award for most concise analysis!

[johnyj]

I don't think so, because: BTC Banks cannot borrow Bitcoin from a central bank to buy more time.

True, no last lender means they have a bankrun risk, so that they should treat each loan much more carefully. This is by design

[johnyj]

Not true. Your home is not an investment (unless you are a dullard). Your home is the place where you live. You can choose to rent or buy. The return on lending the money for a home does not depend on the value of the property but on the income of the borrower. When I was paying the mortgage on my house, the value could have dropped hugely yet I would have continued to pay. It's the idiots who borrow (and the idiots who lend) more than can afford to be paid back that are the problem.

The return on lending the money for a home depend on the FUTURE income of the borrower. In a society that computer and machine continuously replace people and all the low tech work outsourced to other country, how could you make sure the future income is secured for the home buyer? That FUTURE is not one or two months, it is 20 years or more, who can see that far?

[Richy_T]

Not true. Your home is not an investment (unless you are a dullard). Your home is the place where you live. You can choose to rent or buy. The return on lending the money for a home does not depend on the value of the property but on the income of the borrower. When I was paying the mortgage on my house, the value could have dropped hugely yet I would have continued to pay. It's the idiots who borrow (and the idiots who lend) more than can afford to be paid back that are the problem.

The return on lending the money for a home depend on the FUTURE income of the borrower. In a society that computer and machine continuously replace people and all the low tech work outsourced to other country, how could you make sure the future income is secured for the home buyer? That FUTURE is not one or two months, it is 20 years or more, who can see that far?

Completely true. My point is simply that the return on a house loan is not dependent on the future price of the house.

[bobitza]

I don't think so, because: BTC Banks cannot borrow Bitcoin from a central bank to buy more time.

True, no last lender means they have a bankrun risk, so that they should treat each loan much more carefully. This is by design

Exactly. If loans can still theoretically be made and fractional reserve banking and interest can still be part of the loaning process, the fact that there is no last lender and the fact that it is a well know fact that there is a known total maximum amount of coins make banks run risks very high.

I still have a question on loans as a way of generating credit. Will there be an interest in BTC loans? I know interest can be regarded as a measure of risk and as a measure of inflation protection. With a deflationary currency, how would interest be calculated? I.e. - this project has low risk of 4% and BTC appreciates on average 5% per year ... therefore your loan interest will be -1%?!

[MoonShadow]

I don't think so, because: BTC Banks cannot borrow Bitcoin from a central bank to buy more time.

True, no last lender means they have a bankrun risk, so that they should treat each loan much more carefully. This is by design

Exactly. If loans can still theoretically be made and fractional reserve banking and interest can still be part of the loaning process, the fact that there is no last lender and the fact that it is a well know fact that there is a known total maximum amount of coins make banks run risks very high.

It makes them higher than what you're used to, that does not make such risk "high".  A bitcoin bank that fractionally loans out twice as much as it keeps in reserves can crediblely do so, so long as it's open and up front abou it's methods and long term CD's are it's primary method of raising capital (or some other not-on-demand deposit system).

I still have a question on loans as a way of generating credit. Will there be an interest in BTC loans?

Almost certainly.  There have always been interest in investment loans.

I know interest can be regarded as a measure of risk and as a measure of inflation protection. With a deflationary currency, how would interest be calculated? I.e. - this project has low risk of 4% and BTC appreciates on average 5% per year ... therefore your loan interest will be -1%?!

You're guessing, and poorly.  Keep thinking and you might get there on your own.

[molecular]

I don't think so, because: BTC Banks cannot borrow Bitcoin from a central bank to buy more time.

True, no last lender means they have a bankrun risk, so that they should treat each loan much more carefully. This is by design

Exactly. If loans can still theoretically be made and fractional reserve banking and interest can still be part of the loaning process, the fact that there is no last lender and the fact that it is a well know fact that there is a known total maximum amount of coins make banks run risks very high.

It makes them higher than what you're used to, that does not make such risk "high".  A bitcoin bank that fractionally loans out twice as much as it keeps in reserves can crediblely do so, so long as it's open and up front abou it's methods and long term CD's are it's primary method of raising capital (or some other not-on-demand deposit system).

Except that the bank can't lend out bitcoins, but only something that can be redeemed for bitcoins. Would you accept a piece of paper that says: "can be redeemed for 1 Bitcoin at the first international bank of bitcoin at any time" instead of 1 Bitcoin?

I wouldn't.

The circumstance that made fractional reserve banking possible historically was the fact that such "receipt money" was already being used for other reasons (gold too hard to store, carry around, cumbersome to transact, divide up)

With bitcoin, how would this happen? Transaction, storage cost and ease of handling of the "base metal" (bitcoin) is already very low and its divisibility high.

Does anyone feel the urge or need to bring his bitcoins to the goldsmith for safekeeping?

Again: I'm not saying it's impossible: I'm just saying I don't see any chain of developments that would make it happen.