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Author Topic: Good thing BTC isn't a debt based currency.  (Read 3955 times)
MoonShadow
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June 14, 2011, 10:02:07 PM
 #1

http://lewrockwell.com/orig12/robins-r1.1.1.html

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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June 15, 2011, 05:02:49 AM
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The dollar or any other fiat currency is not based completely in debt neither. If they were they would have collapsed years ago.

The trick is that the central bank monetizes government debt which is roughtly equivalent to the government printing money.
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June 15, 2011, 05:13:25 AM
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The dollar or any other fiat currency is not based completely in debt neither.

Fiat money is, itself, debt.  The framers of the US Constitution referred to them as 'debt instruments' and banned their issuance in the Coinage Act.  They are obligations of the bank itself, backed up by the "Full Faith & Credit of the United States".  When you go work for a wage, the first thing that happens is that the employer is endebted to the employee.  The employer then pays the debt by transfering that obligation to the government, via the Federal Reserve bank.  They are not called "notes" without reason, just like a mortgage is a "note".

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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June 15, 2011, 05:38:24 AM
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Fiat money is, itself, debt.  The framers of the US Constitution referred to them as 'debt instruments' and banned their issuance in the Coinage Act.  They are obligations of the bank itself, backed up by the "Full Faith & Credit of the United States".  When you go work for a wage, the first thing that happens is that the employer is endebted to the employee.  The employer then pays the debt by transfering that obligation to the government, via the Federal Reserve bank.  They are not called "notes" without reason, just like a mortgage is a "note".

Yes, thats the bank side. I was pointing out that its not all that way (it would have collapse if it were).
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June 15, 2011, 05:57:24 AM
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Sadly they are all debt. The government does not loan from itself. It loans from the home market, the main participants of which are a cartel of banks with the lethal right to issue money from debt. There have already been calls to remove reserve requirements and allow the system to work legally as it does already practically. There are already countries where the reserve ratio is zero, I believe Australia is one.

As for collapsing, in the past 3 decades there have been 3 events so costly it has wiped out al profit from the banking industry for its entire history. Each time the government bailed it out at the expense of the people. You are 100% correct the system will collapse if it is all debt based. The model is very unstable.

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hugolp
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June 15, 2011, 06:05:20 AM
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Sadly they are all debt. The government does not loan from itself. It loans from the home market, the main participants of which are a cartel of banks with the lethal right to issue money from debt. There have already been calls to remove reserve requirements and allow the system to work legally as it does already practically. There are already countries where the reserve ratio is zero, I believe Australia is one.

As for collapsing, in the past 3 decades there have been 3 events so costly it has wiped out al profit from the banking industry for its entire history. Each time the government bailed it out at the expense of the people. You are 100% correct the system will collapse if it is all debt based. The model is very unstable.

Its not all debt.

Yes, there is the Primary Dealers system in the middle, but the Primary Dealers are government licensed institutions, so they know where their aliances are. The fact of the matter is that when the central banks buy government debt (and they do continuosly, but at alarming rate during this crisis) they are financing the government (even if they dont buy the debt directly to the governmetn, because by buying government debt they artificially increase the demand for government debt, thus decreasing its interest rates, allowing the government to issue more debt).

So no, wheteher the central bank can buy the government debt or through a Primary Dealers system, its not all debt.
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June 15, 2011, 06:20:16 AM
 #7

The constant increases in the base money supply is simply to allow the constant growth of the fractional reserve banking system under current rules. It would collapse if it could not issue more debt continuously.

When the debt matures the government pays it back with interest, even if it was issued by the central bank. If the bank rolls it over, they simply extend the loan, but cause constant inflation. The banking industry permits this since the government is their collections agency. The government is however indebted to the banking industry and at its mercy, squandering the opportunities to break free.

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hugolp
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June 15, 2011, 06:32:01 AM
 #8

The constant increases in the base money supply is simply to allow the constant growth of the fractional reserve banking system under current rules. It would collapse if it could not issue more debt continuously.

When the debt matures the government pays it back with interest, even if it was issued by the central bank. If the bank rolls it over, they simply extend the loan, but cause constant inflation. The banking industry permits this since the government is their collections agency. The government is however indebted to the banking industry and at its mercy, squandering the opportunities to break free.

So you are accepting my point. Not all money is debt in the present monetary system.

Btw, it is false that the government is the slave of the banking system in the present monetary system. Both bankers and politicians benefit from it. The bankers because it allows them to emit much more debt than they could in a free market and the politicians because they get to emit more government debt and allows the government to spend more than it could only through direct taxes. The ones being screewed are the rest of the citizens that pay all this through higher prices.
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June 15, 2011, 07:25:52 AM
 #9

I do accept your point that it is not all our debt directly and some of it is allowed to be rolled over forever.

I live in South Africa and our previous reserve bank governor now works for Goldman Sachs. He and a whole bunch of others (one of whom is the current deputy governor of the reserve bank) were sent on free "economic training" by Goldman in the early 90s.

When Greece was about to default they turned their energies against everything except their debt. This is not the actions of a sovereign nation, this is the actions of an underling bowing to his betters. (No offence meant to Greece or Greeks, they are simply some of the first to be hit by the system's ultimate implications)

So with Goldman being able to issue South African currency (among many, many others) and buy up US debt and "sterilize" US currency, but the government of the US only being able to issue US debt and maybe US currency, who is at who's mercy?

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hugolp
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June 15, 2011, 07:47:44 AM
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I do accept your point that it is not all our debt directly and some of it is allowed to be rolled over forever.

I live in South Africa and our previous reserve bank governor now works for Goldman Sachs. He and a whole bunch of others (one of whom is the current deputy governor of the reserve bank) were sent on free "economic training" by Goldman in the early 90s.

When Greece was about to default they turned their energies against everything except their debt. This is not the actions of a sovereign nation, this is the actions of an underling bowing to his betters. (No offence meant to Greece or Greeks, they are simply some of the first to be hit by the system's ultimate implications)

So with Goldman being able to issue South African currency (among many, many others) and buy up US debt and "sterilize" US currency, but the government of the US only being able to issue US debt and maybe US currency, who is at who's mercy?

I agree. I think the best thing that could happen to any nation is getting rid of the central bank.

Btw, the guy that will replace Trichet at the front of the European Central Bank is an italian that, surprise surprise!, is an ex-Goldman Sachs employee. Wink The funny part is that the germans wanted Axel Webber as head of the ECB. Webber is much more hawky than the itailian GS one. But Merkel, the german canciller, started talking with Webber about what they wanted from him, and he decided to quit from the ECB and returned to the Bundesbank. Cheesy Merkel did not talk about the issue for weeks, and finally accepted the italian GS one, that is much more inflationary and will keep the european countries alive inside the system by printing money so they can keep returning the money to the banks instead of defaulting on it (although there might be some partial default because the debt is so big is just unpayable, the german banks are getting ready for this, with the help of the ECB of course...)
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June 15, 2011, 07:48:04 AM
 #11

Fiat money is, itself, debt.  The framers of the US Constitution referred to them as 'debt instruments' and banned their issuance in the Coinage Act.  They are obligations of the bank itself, backed up by the "Full Faith & Credit of the United States".  When you go work for a wage, the first thing that happens is that the employer is endebted to the employee.  The employer then pays the debt by transfering that obligation to the government, via the Federal Reserve bank.  They are not called "notes" without reason, just like a mortgage is a "note".

Fiat money does not have to be debt based, our current fiat money system however IS debt based because every dollar that exists came out of the federal reserve at interest.

If the government simply issued the money itself without the federal reserve middle man, they could just print it without having to pay interest on it. We basically rent our money supply from the fed. The government doesn't need to do this, it could just print the money instead of printing the damn bonds.

Bitcoin itself is a fiat currency (as it is backed by absolutely nothing except trust in the system), it is also not debt based. Two very important attributes.

The only thing bitcoin is missing in my opinion, is that the money supply should expand infinitely at around a fixed 2-3% rate a year as Milton Friedman suggested. Since banks will not be able to engage in such heavy fractional reserve banking with bitcoins (because it will be impossible to bailout a 10:1 ratio of loans), the interest rates for depositors in banks will be higher than the inflation rate, protecting the purchasing power.

Money printing is only bad when they start to exceed the amount of products and services in the economy, and the newly printed money chases after the existing products and services in the market, instead of going to create new things such as useful infrastructure.

Printing money to create infrastructure that will be useful (NO BRIDGES TO NOWHERE): Good.
Printing money to recipients that will just use it to buy goods and services with the newly created money: Bad.

Bitcoin is an excellent project, it's not perfect, but it's far better than what we currently have.
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June 15, 2011, 09:03:51 AM
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The only thing bitcoin is missing in my opinion, is that the money supply should expand infinitely at around a fixed 2-3% rate a year as Milton Friedman suggested.
We should not project the limitations of actual government issued currencies on to Bitcoin. Remeber that if currencies become part of the free market, and many free currencies can coexist, other free currencies will come along to fill the need for growth. The real problem is the monopoly of currency that the governments try to enforce. With free market currencies like Bitcoin and others to come, this is not a problem.

Money printing is only bad when they start to exceed the amount of products and services in the economy,
This is only bad if you are stuck with only one type of currency in your country. If the market has plenty of options to choose from, the market will select the best currencies, and ditch the bad ones. Worthless pieces of paper issued by corrupt organizations would be ditched quite fast in fact.
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June 15, 2011, 09:27:27 AM
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Fiat money does not have to be debt based, our current fiat money system however IS debt based because every dollar that exists came out of the federal reserve at interest.

As explained and discussed above, not all the money in the present system is debt based.

Quote
If the government simply issued the money itself without the federal reserve middle man, they could just print it without having to pay interest on it.

The governments does not pay interest on the money it gets from its central bank. Yes the government pays interest on the bonds the central bank buys, but the central bank returns the benefits it gets to the government (including the interest it charges to the banks), so for all practical matter the government is not paying it.

Quote
We basically rent our money supply from the fed. The government doesn't need to do this, it could just print the money instead of printing the damn bonds.

This is exaclty what its already happening in the present system.

Quote
Bitcoin itself is a fiat currency (as it is backed by absolutely nothing except trust in the system), it is also not debt based. Two very important attributes.

Bitcoin is not a fiat currency. Fiat means imposed by force, usually by the government.

If you define fiat as a currency not backed by anything, then gold and silver are also fiat, since they are not backed by anything. This definition does not make sense.

Quote
The only thing bitcoin is missing in my opinion, is that the money supply should expand infinitely at around a fixed 2-3% rate a year as Milton Friedman suggested. Since banks will not be able to engage in such heavy fractional reserve banking with bitcoins (because it will be impossible to bailout a 10:1 ratio of loans), the interest rates for depositors in banks will be higher than the inflation rate, protecting the purchasing power.

Milton Friedman was very wrong regarding monetary policy (he was right about other things). There is no reason why there should be a 2-3% inflation rate (why not 1%?, why not 5%?). There is absolutely no reason in monetary theory why it should be this way.

Quote
Money printing is only bad when they start to exceed the amount of products and services in the economy, and the newly printed money chases after the existing products and services in the market, instead of going to create new things such as useful infrastructure.

Do you realize that money does not have a direct relationship with the amount of products and services in the economy because prices change? What you mean is that you want some price index to remain relatively constant. There is no reason why this should be this way.

Also, do you realize that "to create new things such as useful infrastructure" money has to "chase after the existing products and services in the market"?

Quote
Printing money to create infrastructure that will be useful (NO BRIDGES TO NOWHERE): Good.
Printing money to recipients that will just use it to buy goods and services with the newly created money: Bad.

This is a fallacy. You are presuposing that the government without a price system can decide what is good and bad investments. There is a reason why there is a market and government central planning does not work.

Again both things create new infrastructure and chasing existing goods and services go together.

Quote
Bitcoin is an excellent project, it's not perfect, but it's far better than what we currently have.

You can go and try to create an alternative, but there is a reason why the system your propose has never emerge from the civil society and the examples in history are all imposed by the governments using force. And btw, they have all hyperinflated creating big poverty.
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June 15, 2011, 09:34:39 AM
 #14

Fiat money is, itself, debt.  The framers of the US Constitution referred to them as 'debt instruments' and banned their issuance in the Coinage Act.  They are obligations of the bank itself, backed up by the "Full Faith & Credit of the United States".  When you go work for a wage, the first thing that happens is that the employer is endebted to the employee.  The employer then pays the debt by transfering that obligation to the government, via the Federal Reserve bank.  They are not called "notes" without reason, just like a mortgage is a "note".

Fiat money does not have to be debt based, our current fiat money system however IS debt based because every dollar that exists came out of the federal reserve at interest.

If the government simply issued the money itself without the federal reserve middle man, they could just print it without having to pay interest on it. We basically rent our money supply from the fed. The government doesn't need to do this, it could just print the money instead of printing the damn bonds.

Bitcoin itself is a fiat currency (as it is backed by absolutely nothing except trust in the system), it is also not debt based. Two very important attributes.

The only thing bitcoin is missing in my opinion, is that the money supply should expand infinitely at around a fixed 2-3% rate a year as Milton Friedman suggested. Since banks will not be able to engage in such heavy fractional reserve banking with bitcoins (because it will be impossible to bailout a 10:1 ratio of loans), the interest rates for depositors in banks will be higher than the inflation rate, protecting the purchasing power.

Money printing is only bad when they start to exceed the amount of products and services in the economy, and the newly printed money chases after the existing products and services in the market, instead of going to create new things such as useful infrastructure.

Printing money to create infrastructure that will be useful (NO BRIDGES TO NOWHERE): Good.
Printing money to recipients that will just use it to buy goods and services with the newly created money: Bad.

Bitcoin is an excellent project, it's not perfect, but it's far better than what we currently have.

Aaah, fix the system thinking, I remember it fondly Cheesy

Have you ever wondered about prices, what they are and how on earth we come up with them. Prices are subjective human beings' way of determining how much effort something is worth to them. If you have to pay $100 for an item slightly better than a similar $90 item then you will be free to decide if the additional features are worth the effort you personally have in generating $10.

Governments spend money from people who worked for it without having had to work for it. This one simple fact makes building a bridge to somewhere completely impossible to them. I've worked for government and I can tell you now, the problem is not corruption, it is thinking that more controls, better controls, controls from smarter people, and controls control controls will ultimately fix a fundamental underlying flaw; government does not respond to the price mechanism, if they are ineffective, they can still fund themselves tomorrow at gunpoint.

Ludwig von Mises predicted the collapse of the Soviet Union on exactly this basis. Since they don't know what people are willing to work for, what people want on an individual level (which is what the price mechanism does) then they are doomed to misspend funds to the point of collapse.

Another problem is, who has the right to purchase assets with money injected via money creation, even if exactly 0% inflation (non-flation Huh) is possible? Our elected officials? Bankers? And if we allow this privilege for someone how do we know they won't simply start buying up all manner of assets for themselves?

A better solution would be to let the benefits accrue to the existing market participants through price deflation.

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MoonShadow
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June 15, 2011, 03:16:08 PM
 #15

Fiat money is, itself, debt.  The framers of the US Constitution referred to them as 'debt instruments' and banned their issuance in the Coinage Act.  They are obligations of the bank itself, backed up by the "Full Faith & Credit of the United States".  When you go work for a wage, the first thing that happens is that the employer is endebted to the employee.  The employer then pays the debt by transfering that obligation to the government, via the Federal Reserve bank.  They are not called "notes" without reason, just like a mortgage is a "note".

Fiat money does not have to be debt based, our current fiat money system however IS debt based because every dollar that exists came out of the federal reserve at interest.

Um, no.  Every fiat currency is debt based by definition because the paper note is an abstraction of value, not the value itself.  The paper notes represent an obligation of a third party, in most cases, of the entity that issued it.  Even warehouse receipts for gold bullion are debt, because those receipts represent an obligation of a third party to perform an act, namely exchange a specific weight in gold upon demand with said receipt.  Although a gold standard is certain a more reliable form of debt, only the physical trading of the gold itself does not represent a transfer of a debt.  Bitcoin is very much like gold (and silver) in this respect, as it doesn't represent a promise of value (gold standard) nor any other form of third party obligation (futures trading, fiat currencies the world over, and just about any other contract based form of trade, explicit or implicit), as bitcoin is the object of value.  This is one of the attributes that makes Bitcoin so revolutionary.   Even the Liberty Dollar was a debt whenever the paper notes were used, as the gold was stored in a vault and if you showed up there with the paper notes, Liberty Reserve LLC would have been obligated (under implicit contract) to provide all the gold those notes represented.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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June 15, 2011, 09:33:04 PM
 #16

Fiat means "by decree", debt based means backed by a debt instrument. It is a bit of a stretch to refer to a receipt for gold as "debt based" when the money is not secured against "debt as in a loan"

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MoonShadow
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June 15, 2011, 10:28:44 PM
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Fiat means "by decree", debt based means backed by a debt instrument. It is a bit of a stretch to refer to a receipt for gold as "debt based" when the money is not secured against "debt as in a loan"

Nonsense.  Debt based means that the paper is an abstraction of some third party's obligation to perform, otherwise known as a "debt".

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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June 16, 2011, 01:39:50 AM
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We should not project the limitations of actual government issued currencies on to Bitcoin. Remeber that if currencies become part of the free market, and many free currencies can coexist, other free currencies will come along to fill the need for growth. The real problem is the monopoly of currency that the governments try to enforce. With free market currencies like Bitcoin and others to come, this is not a problem.

I absolutely support a free market of currencies, bitcoin doesn't have to be the only one. Perhaps another one can pop up using the same technology as bitcoin with different parameters some day.

The market will determine who's the winner in the long run.

As explained and discussed above, not all the money in the present system is debt based.

Only the coins which are issued by the US Treasury are not debt based.


The governments does not pay interest on the money it gets from its central bank. Yes the government pays interest on the bonds the central bank buys, but the central bank returns the benefits it gets to the government (including the interest it charges to the banks), so for all practical matter the government is not paying it.

This is exaclty what its already happening in the present system.

If that's the way it worked, then there would not be a national debt.

Why do you think they need to raise the debt ceiling in order to borrow more money from the fed?

The fed itself has said that if every debt was paid off that was owed to the fed, there would be no more money in our monetary system.

Bitcoin is not a fiat currency. Fiat means imposed by force, usually by the government

Perhaps you should do a little research on the term Fiat.

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

Quote
The term fiat money has been defined variously as:

* any money declared by a government to be legal tender.[3]
* state-issued money which is neither legally convertible to any other thing, nor fixed in value in terms of any objective standard.
* money without intrinsic value.


...

Quote
fiat money is based solely on faith in the government issuing the money.

For purposes of simplification, we are relying on faith in the system.

Milton Friedman was very wrong regarding monetary policy (he was right about other things). There is no reason why there should be a 2-3% inflation rate (why not 1%?, why not 5%?). There is absolutely no reason in monetary theory why it should be this way.

I used to think the same, that Milton Friedman was wrong about monetary policy.

The trouble with no inflation is eventually over periods of several generations, the wealth will be consolidated among the few, inflation will make that harder, and with higher savings rate, it resolves the issue with loss of purchasing power.

Once the few have most of the currency they can use it to pretty much enslave the masses. They can make credit cheap, putting everyone in debt, and then make credit expensive, forcing everyone into default.

Boom and bust.

But in order to do that, you need to have control of enough currency.

Also, do you realize that "to create new things such as useful infrastructure" money has to "chase after the existing products and services in the market"?

Yes, but the new things that are created either will increase production, or money can chase after those new things. For example if the government prints $250,000 out of thin air, and uses the money to build a house, something now exists that didn't exist before (the house), and the money in the financial system can chase after the house itself.

In other words, the money isn't being used just to blow it on non-capital goods.

If the government prints $250,000 to build 10x $25,000 tractors, and then those tractors are used to increase farm production, you have more money in the system, but there are also more products.

No doubt about it, printing money is a dangerous tool that can be used to cause incredible damage to the economy, but there are correct instances where it can be used to benefit.

If they use it to build 10 tractors that just sit and rust, it's bad.
If they use it to build a house that just sits empty and falls apart, it's bad.

It's a tool. It can be used for good, and it can be used for bad.

This is a fallacy. You are presuposing that the government without a price system can decide what is good and bad investments. There is a reason why there is a market and government central planning does not work.

This isn't central planning, nor is it the abolishment of the price system (which for some reason you think it is).

You can go and try to create an alternative, but there is a reason why the system your propose has never emerge from the civil society and the examples in history are all imposed by the governments using force. And btw, they have all hyperinflated creating big poverty.

Because the quantity of the money was not controlled. It hyperinflates because the government goes out of control. A fixed-inflation bitcoin currency won't have the problem of a government going out of control with creation of currency units.

It does not matter what the money is, all that matters is who controls the quantity.

Um, no.  Every fiat currency is debt based by definition because the paper note is an abstraction of value, not the value itself.

A fiat currency is any paper money system that the government issues.
A debt based currency is a form of money that is borrowed at interest, when it enters into the money supply.

Let's create a monetary system similiar to what exists today.

We're all stranded on an Island, you are the government, and I am the central bank.

The people want places to sleep in, so they all vote to spend $10,000 that will be used to pay people to build huts. You then create $10,000 of government bonds that pay 10% interest. I buy those bonds for $10,000 and now you spend that $10,000 into the local economy. The money is spent in all areas of the local economy, such as collecting food, wood, leaves, etc.

A medium of exchange has been established for the local population.

However, the government now owes me $11,000 in one year. How are you going to pay it without getting into even more debt? You can't.

And the sick thing of it all is, instead of printing $10,000 of bonds, you could have just printed $10,000 and told me to go screw myself.

By the way, all online video games with economies, have debt free fiat currencies. EVE-Online is a prime example. The game companies have no reason to manipulate the game currency like real life banksters do.
hugolp
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June 16, 2011, 02:33:18 AM
 #19

As explained and discussed above, not all the money in the present system is debt based.

Only the coins which are issued by the US Treasury are not debt based.

The governments does not pay interest on the money it gets from its central bank. Yes the government pays interest on the bonds the central bank buys, but the central bank returns the benefits it gets to the government (including the interest it charges to the banks), so for all practical matter the government is not paying it.

This is exaclty what its already happening in the present system.

If that's the way it worked, then there would not be a national debt.

Why do you think they need to raise the debt ceiling in order to borrow more money from the fed?

The fed itself has said that if every debt was paid off that was owed to the fed, there would be no more money in our monetary system.

Please read again what I said.

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Bitcoin is not a fiat currency. Fiat means imposed by force, usually by the government

Perhaps you should do a little research on the term Fiat.

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

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The term fiat money has been defined variously as:

* any money declared by a government to be legal tender.[3]
* state-issued money which is neither legally convertible to any other thing, nor fixed in value in terms of any objective standard.
* money without intrinsic value.

Wikipedia? There is no intrinsic or absolute value. Value is subjective. According to that definition all money is fiat. It makes no sense.


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Milton Friedman was very wrong regarding monetary policy (he was right about other things). There is no reason why there should be a 2-3% inflation rate (why not 1%?, why not 5%?). There is absolutely no reason in monetary theory why it should be this way.

I used to think the same, that Milton Friedman was wrong about monetary policy.

The trouble with no inflation is eventually over periods of several generations, the wealth will be consolidated among the few, inflation will make that harder, and with higher savings rate, it resolves the issue with loss of purchasing power.

Not this stupid fallacy again... Why do people believe this nonsense. Let me explain again:

This "theory" is based on the idea that wealthy people save their wealth in money, therefore if there is inflation they will see their savings eroded. The problem is that in the real world the weatlhy people dont save in money. They basically invest, even with diverse degree of leverage. Therefore inflation benefits them because their assets go up in price, while the wages of the workers go down in value (because they get actualized late). So basically inflation is what concentrates the wealth in a few hands and fucks the poor.

By the way, you can check this empirically as well. Since the 70's there has been more inflation and the gap between rich and poor has increased. During the 2008 deflationary crash the gap diminished. Its because the wealthy save in assets not in money!!!

So please, can we stop this nonsense? Who the fuck is promoting this lie? Its evil, it says that the workers benefit from what its hurting them. Whoever is promoting and teached you that idea is pure evil.

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Once the few have most of the currency they can use it to pretty much enslave the masses. They can make credit cheap, putting everyone in debt, and then make credit expensive, forcing everyone into default.

Yes there is a debt problem, but that is not how it happens. The excessive debt happens because the government regulates the banking system allowing the banks to overextend credit. The debt in the present system is not based on savings, its based on the government money monpolly and the banking cartel it creates.

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Boom and bust.

But in order to do that, you need to have control of enough currency.

Yes, and that happens because the government imposes a money monopolly.

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Also, do you realize that "to create new things such as useful infrastructure" money has to "chase after the existing products and services in the market"?

Yes, but the new things that are created either will increase production, or money can chase after those new things. For example if the government prints $250,000 out of thin air, and uses the money to build a house, something now exists that didn't exist before (the house), and the money in the financial system can chase after the house itself.

In other words, the money isn't being used just to blow it on non-capital goods.

Do you realize that all bubbles tend to happen in capital intensive sectors? How do you explain that?

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If the government prints $250,000 to build 10x $25,000 tractors, and then those tractors are used to increase farm production, you have more money in the system, but there are also more products.

I dont see how this is important. The government could tax and build the tractors. The real important issue is if the tractors are neeed or not. Financing them through direct taxes or through the inflation tax has some implications but at the end of the day the big issue is wheteher the tractors are needed or the resources are better spent somewhere else.

You seem to think that just because the money was printed the resources appear out of nowhere and it does not affect.

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No doubt about it, printing money is a dangerous tool that can be used to cause incredible damage to the economy, but there are correct instances where it can be used to benefit.

Can you point one example in history when money printing was not abused?

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If they use it to build 10 tractors that just sit and rust, it's bad.
If they use it to build a house that just sits empty and falls apart, it's bad.

It's a tool. It can be used for good, and it can be used for bad.

Again, history is not on your side.

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This is a fallacy. You are presuposing that the government without a price system can decide what is good and bad investments. There is a reason why there is a market and government central planning does not work.

This isn't central planning, nor is it the abolishment of the price system (which for some reason you think it is).

It is. You are not letting the price system work. Certainly is not stalist communism, but it does affect the price system and distorts it. It is central planning.

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You can go and try to create an alternative, but there is a reason why the system your propose has never emerge from the civil society and the examples in history are all imposed by the governments using force. And btw, they have all hyperinflated creating big poverty.

Because the quantity of the money was not controlled. It hyperinflates because the government goes out of control. A fixed-inflation bitcoin currency won't have the problem of a government going out of control with creation of currency units.

It does not matter what the money is, all that matters is who controls the quantity.

Then go and try it please.

It does not matter what the money is, all that matter is that nobody controls the quantity.
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June 16, 2011, 03:03:34 AM
 #20

The problem is that in the real world the weatlhy people dont save in money. They basically invest, even with diverse degree of leverage.

As opposed to keeping their money outside of the monetary system and riding the natural interest rate of deflation over time. The one positive attribute about inflation is it that it keeps money in the economy, because if you take it out, you lose purchasing power over time.

So please, can we stop this nonsense? Who the fuck is promoting this lie? Its evil, it says that the workers benefit from what its hurting them. Whoever is promoting and teached you that idea is pure evil.

I used to think the same exact thing.

http://www.youtube.com/watch?v=swkq2E8mswI

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Can you point one example in history when money printing was not abused?

Tally sticks.

But just because money printing was abused, doesn't mean it was done by the government issuing it.

Colonial script was so effective that the bankers had to have England outlaw it (which resulted in a depression), they also passed the STAMP Act as well. This was one of the leading causes of the American Revolution that the bankers have erased from history.

And continental was massively counterfeited by the British, leading to the very popular term "Not worth a continental."

As long as they just issue enough to enable it to be used as a medium of exchange, it works just fine.

You only get into trouble when they expand the money supply too fast. A rate of inflation that is programmatically enforced and cannot be manipulated up or down by governments is immune from this problem.

It is. You are not letting the price system work. Certainly is not stalist communism, but it does affect the price system and distorts it. It is central planning.

The money would not be spent from the dictates of a single central planner, but by the votes of the REPRESENTATIVE government. Central planning is typically where a single entity dictates whats going to happen whether the people want it or not, and there is no recourse. A central planner cannot lose his job by the will of the people.

It is of no comparison to soviet style central planning.

It does not matter what the money is, all that matter is that nobody controls the quantity.

If a group of people eventually control a majority of the bitcoins, and no new bitcoins are created, they will be able to manipulate the money supply. It may take a hundred years, but it will eventually happen.

Just like the gold standard was manipulated in history. Cheap credit, lots of debt, tighten credit, rinse and repeat.

Bitcoin can resolve the manipulation problem with the proper attributes. Over time the bankers will eventually get control of enough bitcoins to manipulate the currency.

Please show me a time in history where they have not gained control of the money supply.
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