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Author Topic: Money as Debt  (Read 12096 times)
Bruce Wagner
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November 29, 2010, 02:41:34 AM
 #21

Ok, I just wrote an email to the creators of the film...


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To:  pgrignon@island.net
Subject:  Money as Debt II

Hello!

We are discussing your film in the Bitcoin Forum  ( here http://bitcointalk.org/index.php?topic=1992.0 )

Are you already familiar with Bitcoin?!?!?

If not, please see  http://BitcoinMe.com for a quick introduction to what it's all about.

Bitcoin is a FOSS (free open source software) project that is making huge advances very quickly.   The Bitcoin economy is already over US$1.3 Million in total value.

We already have a "bounty"  ( sort of a contest, to see who can come up with the best animated video explaining Bitcoin to everyday people... with the best video winning the prize pot... currently about $2,520 ).   See http://bitcointalk.org/index.php?topic=697.0;all

I think it would be wonderful if you were to create a film explaining  "What is a Bitcoin?"       

Also, I've gotta ask...     Toward the end of "Money As Debt II", you were describing a digital currency enabled through encryption technology....   Were you already aware, at that time, that Bitcoin existed... or was about to be invented?

Bruce Wagner
New York City
http://BitcoinMe.com
646-580-0022

Why didn't we think of contacting them before?
By the way, when exactly did Bitcoin first launch - what date?   (I need to brush up on some of my basic facts before my national radio interview about Bitcoin on Thursday morning!)
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November 29, 2010, 03:15:40 AM
 #22

By the way, when exactly did Bitcoin first launch - what date?   (I need to brush up on some of my basic facts before my national radio interview about Bitcoin on Thursday morning!)

See http://www.bitcoin.org/wiki/doku.php?id=bitcoin_history for a basic list.



Jeff Garzik, bitcoin core dev team and BitPay engineer; opinions are my own, not my employer.
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November 29, 2010, 03:44:51 AM
 #23

This has been an entertaining video.  I will agree that fractional reserve banking is perhaps one of the greatest frauds ever invented by men and is going to end up causing an eventual disaster when the scheme falls apart.  I also agree with the sentiment expressed in the video that it makes no sense at all for the government to be borrowing money from bankers who in turn are borrowing the money from the federal reserve pocketing the difference or better yet "depositing" the interest as reserves and "loaning" more money created out of thin air to the government.

An interesting article I read recently on fractional reserve banking and libertarianism:
http://www.anti-state.com/article.php?article_id=416

I don't think FRB is inherently evil, it's the central banking system and money printing that's the real problem. Without the supply of and value of money (interest rates) being artificially manipulated buy a central authority, FRB is relatively harmless.
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November 29, 2010, 03:53:41 AM
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I don't think FRB is inherently evil, it's the central banking system and money printing that's the real problem.

It' the former that enables the latter.  Before the banking acts of 1913 that legalized fractional reserve banking as well as the Federal Reserve itself, fractional reserve banking was considered fraud.

"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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November 29, 2010, 04:10:27 AM
 #25

Fractional reserve banking mean that the bank have a tendency to collapse. I think we're safer with mtgox type banks where they just keep the balance and earn their fees somewhere.

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November 29, 2010, 04:24:48 AM
 #26

Why didn't we think of contacting them before?

They have been contacted before. Check out their forum. Smiley

Thanks for your efforts; they only help. Cheesy
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November 29, 2010, 08:09:55 AM
 #27

I don't think FRB is inherently evil, it's the central banking system and money printing that's the real problem. Without the supply of and value of money (interest rates) being artificially manipulated buy a central authority, FRB is relatively harmless.
+1

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November 29, 2010, 08:35:05 AM
 #28

Fractional reserve banking mean that the bank have a tendency to collapse. I think we're safer with mtgox type banks where they just keep the balance and earn their fees somewhere.

Mtgox has promised "margin trading" which fits the description of fractional reserve banking.
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November 29, 2010, 09:01:20 AM
 #29

Fractional reserve banking mean that the bank have a tendency to collapse. I think we're safer with mtgox type banks where they just keep the balance and earn their fees somewhere.

Mtgox has promised "margin trading" which fits the description of fractional reserve banking.

AFAIU fractional reserve banking and margin trading are two very different things.

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November 29, 2010, 10:37:00 AM
 #30

With respect to Kiba's post that he trusts "mtgox type banks" insofar as he can withdraw his deposits from them at any time, he shouldn't throw caution to the wind.  once mtgox requires less than 100% of a bitcoin deposit from you in order to sell a bitcoin, even if there are margin calls and position liquidations, in an illiquid market not all deposits can be guaranteed.  So with respect to risks of losing one's deposit, mtgox's margin trading resembles a bank run on a bank keeping fractional reserves.



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November 29, 2010, 10:52:51 AM
 #31

With respect to Kiba's post that he trusts "mtgox type banks" insofar as he can withdraw his deposits from them at any time, he shouldn't throw caution to the wind.  once mtgox requires less than 100% of a bitcoin deposit from you in order to sell a bitcoin, even if there are margin calls and position liquidations, in an illiquid market not all deposits can be guaranteed.  So with respect to risks of losing one's deposit, mtgox's margin trading resembles a bank run on a bank keeping fractional reserves.





Hopefully then, the availability of margin accounts will increase liquidity enough that deposits can be practically guaranteed!

As a side note, I wonder how much downward pressure will be put on the exchange rate due to traders finally being able to easily make short sales.
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November 29, 2010, 01:56:27 PM
 #32

This has been an entertaining video.  I will agree that fractional reserve banking is perhaps one of the greatest frauds ever invented by men and is going to end up causing an eventual disaster when the scheme falls apart.

An interesting article I read recently on fractional reserve banking and libertarianism:
http://www.anti-state.com/article.php?article_id=416

I don't think FRB is inherently evil, it's the central banking system and money printing that's the real problem. Without the supply of and value of money (interest rates) being artificially manipulated buy a central authority, FRB is relatively harmless.

I read this article and I will say it tempers my attitude somewhat towards the idea of banks doing this.  One of the things sort of not stated is that most current banks assume that you know about fractional reserve currency already and that you have agreed to the system.  Perhaps that is the real scam, although if you asked a branch manager or bank executive I'm sure they would explain the system in detail if you were interested.  There still is something just a little off, however, in terms of the system actually used within both Europe with the EU, the GBP, and how the Fed deals with dollars.

With a "bank" running under bitcoins, such a bank can loan out all of the money which has been put in by depositors, but there is no mechanism where the bank can make more loans than deposits.  That, BTW, is the "fraction" which the banks are doing, where they are indeed loaning more than they have in terms of deposits and investments and the deposits are a "fraction" of loans.  Since a Bitcoin has to be mined with a clear history of the coin from when it was first generated to when it is spent, it can't be inflated except as something leveraged from loans from others which must be paid back.

Thinking a little deeper about the videos, one of the key tests of Bitcoins is going to be when there is a significant enough of a dispute between two parties in the same legal jurisdiction (to keep things simple) where the judicial system is going to need to step into the dispute over a transaction involving Bitcoins.  Fiat dollars are treated as money precisely because courts recognize them as instruments which can settle a debt including the ability to pay taxes with them.  That may not be the case for Bitcoins.  Does anybody know of any legal case between say two Liberty Reserve users or some other "alternative money" in American courts that might be used as precedence on that issue?  I'm not asking for the formal brief, just if anybody has heard of that happening before?:

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November 29, 2010, 02:19:51 PM
 #33

Basically when a banker makes a loan, he does indeed creates money out of nothing but the promess from the borrower to repay this.

I call it "legalized fraud".


+1

Also, i concede with 98% of opinions stated in the movie. Although it perhaps simplifies some things too much, this is still how the money making works today.

Banking industry == Legalized fraud

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November 29, 2010, 02:56:08 PM
 #34

I'm a bit more then just a socialist and I know bitcoin is a step towards getting away from government/corporation authority and control. After that it will help move into a classless society and possibly money will be abolished altogether.

Is it just me, or is there something not quite right with someone who is "more than a socialist" but yet wants to eliminate or reduce government?  Bitcoin is a pure capitalist system, and, honestly, the past N years of capitalism don't seemed to have worked out so great for society - witness A) the BP oil spill and countless other environmental disasters, B) the continuously widening gap between rich & poor right throughout all western (& other) society.  Are you sure, bober182, that you're not a closet anarchist?


I'm enjoying this thread - much of it has been discussed before (see https://www.bitcoin.org/smf/index.php?topic=376.0).  There is an important point which I think many people are missing.  As some of you have pointed out, bitcoins only have value if you spend them.  There is no point in hoarding 99% of all bitcoins.  However, if you become "The Bitcoin Bank" and lend at interest, then as "Money as Debt" says, you will continue accumulating more and more bitcoins.  As people pay you back, you'll naturally have to find a way to spend them, or loan them again.  BUT, when people can't pay you back, you get to repossess their physical property.  This is why interest can't really work.  Interest does nothing other than increase the wealth of the wealthy, at the expense of those in poverty.  And *that's* the clincher - bitcoins have value only insofar as they can help you obtain property.  But if you can get the property another way, well, then bitcoins just become a tool.

Now, if you can *inflate* your currency, or tax it, then maybe you can mitigate the accumulation, at least until the wealthy people become so powerful as to dictate tax & inflation policy to the policy-makers.
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November 29, 2010, 03:08:17 PM
 #35

I'm a bit more then just a socialist and I know bitcoin is a step towards getting away from government/corporation authority and control. After that it will help move into a classless society and possibly money will be abolished altogether.

Is it just me, or is there something not quite right with someone who is "more than a socialist" but yet wants to eliminate or reduce government?  Bitcoin is a pure capitalist system, and, honestly, the past N years of capitalism don't seemed to have worked out so great for society - witness A) the BP oil spill and countless other environmental disasters, B) the continuously widening gap between rich & poor right throughout all western (& other) society.

Those are not examples of failures of capitalism, but failures of corproratism.  Not that capitalism can't fail, but it is a self-correcting system.

"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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November 29, 2010, 03:20:14 PM
 #36

A) the BP oil spill and countless other environmental disasters, B) the continuously widening gap between rich & poor right throughout all western (& other) society.

Those are not examples of failures of capitalism, but failures of corproratism.  Not that capitalism can't fail, but it is a self-correcting system.

Capitalism is the idea that you can put a price on anything, and that the one who manages to sell at the lowest price should be rewarded.  The logical conclusion, therefore, is that capitalists will *always* seek to minimise their costs at the expense of, well, anything.  In these cases, they are selling the future in order to turn a quick buck now.

How is capitalism self-correcting?  Will it correct the Nigerian oil spills?  I really think it would take massive government intervention to fix that.  And how could a capitalist society ever, ever, narrow the gap between rich & poor?
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November 29, 2010, 03:42:44 PM
 #37

An interesting article I read recently on fractional reserve banking and libertarianism:
http://www.anti-state.com/article.php?article_id=416

I've read this article, and with regard to the current economic system, the author is missing one crucial detail.  He states, correctly, that if a bank were to engage in excessive FRB, i.e. to recklessly print extra 'money', then its notes would naturally devalue.  Well, that works when banks can issue only their own notes.  In the current system, the money produced by the bank *is equivalent to* the fiat currency accepted by the government for tax payments.  Thus, no devaluation of the bank's private notes - the devaluation is spread across everybody's currency holdings.  So the banks go for short term profit, at the risk of destabilising the entire economic system's future.
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November 29, 2010, 04:28:12 PM
 #38

A) the BP oil spill and countless other environmental disasters, B) the continuously widening gap between rich & poor right throughout all western (& other) society.

Those are not examples of failures of capitalism, but failures of corproratism.  Not that capitalism can't fail, but it is a self-correcting system.

Capitalism is the idea that you can put a price on anything, and that the one who manages to sell at the lowest price should be rewarded.  The logical conclusion, therefore, is that capitalists will *always* seek to minimise their costs at the expense of, well, anything.  In these cases, they are selling the future in order to turn a quick buck now.


That's not capitalism.

"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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November 29, 2010, 04:29:27 PM
 #39

An interesting article I read recently on fractional reserve banking and libertarianism:
http://www.anti-state.com/article.php?article_id=416

I've read this article, and with regard to the current economic system, the author is missing one crucial detail.  He states, correctly, that if a bank were to engage in excessive FRB, i.e. to recklessly print extra 'money', then its notes would naturally devalue.  Well, that works when banks can issue only their own notes.  In the current system, the money produced by the bank *is equivalent to* the fiat currency accepted by the government for tax payments.  Thus, no devaluation of the bank's private notes - the devaluation is spread across everybody's currency holdings.  So the banks go for short term profit, at the risk of destabilising the entire economic system's future.

Nope, he was right.  You need to do more research.

"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'
RHorning
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November 29, 2010, 04:51:13 PM
 #40

I'm a bit more then just a socialist and I know bitcoin is a step towards getting away from government/corporation authority and control. After that it will help move into a classless society and possibly money will be abolished altogether.
I'm enjoying this thread - much of it has been discussed before (see https://www.bitcoin.org/smf/index.php?topic=376.0).  There is an important point which I think many people are missing.  As some of you have pointed out, bitcoins only have value if you spend them.  There is no point in hoarding 99% of all bitcoins.  However, if you become "The Bitcoin Bank" and lend at interest, then as "Money as Debt" says, you will continue accumulating more and more bitcoins.  As people pay you back, you'll naturally have to find a way to spend them, or loan them again.  BUT, when people can't pay you back, you get to repossess their physical property.  This is why interest can't really work.  Interest does nothing other than increase the wealth of the wealthy, at the expense of those in poverty.  And *that's* the clincher - bitcoins have value only insofar as they can help you obtain property.  But if you can get the property another way, well, then bitcoins just become a tool.

A difference between bitcoins and other currencies, so far as lending money from a "bitcoin bank", is that such a loan would be more of an "investment", and in fact a bank could be thought of perhaps as a "mutual fund" rater than a conventional bank as it is normally known... with the same benefits and risks.

"Depositors" into a "bitbank" would risk some of their coins on various kinds of "investments" which may be paid off eventually or not.  Much of it depends on how everything is structured, but conventional fixed interest rates might actually be the exception rather than the rule.  You might have "banks" which specialize in risky investments or ones that only invest in a sure thing.  It is for this reason that I think it would be better to look at such deposits more as buying shares where you get a pooled return on investment.

One of the things that a fractional reserve currency offers is that there is a much larger disconnect between the depositors and the loans, where usually a depositor doesn't really care if a loan fails or not.  The video sort of explains why.  On top of the things in the video, there is also depositor's insurance which adds still an extra layer on top of everything else.  You could perhaps get such insurance, but it would be rather expensive for Bitcoins.

All told, I would think that the stock market would be a much stronger source of capital for projects than banks, and bank loans as you normally know them would be a relatively rare thing.  Perhaps businesses could get into the game of making loans for houses and automobiles, but credit requirements would be incredibly tight compared to what is currently typical for such purchases under bitcoins.  On the whole I think this is a good thing as it would make investments into businesses more "democratic" so far as the sources of investment capital wouldn't be concentrated with just the banks.  It certainly would take some time to adjust and cope with the concept.  Banks certainly can't "inflate" the currency due to fractional deposit loans which ultimately is how banks usually are cornering the investement security market.

I'm still undecided so far as how "evil" usury really is and I don't think it is as big of a deal as was expressed in this video.  Hoarding of bitcoins has been abundantly discussed on these forums and is generally not seen as a problem by most current Bitcoin participants or commentators.

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