Why Bitcoin is ultimately doomed to fail (not today or tomorrow)

[Erdogan]

In one sentence, this animation illustrates your misconception about "They can only lend money they have in deposits. Technically, they can in fact lend money they don't have, but they will have to close this imbalance as soon as possible..."

First off, at the banker's counter you see two balancing rows of people; 1. adding money to a deposit and 2. borrowing money from the bank. All's well and sound. Yet, those were the old days and that situation complies to "our" common sense about a bank's process. Nowadays though, when a starter needs money, he goes to a bank where the banker gives him credits by filling in numbers in a computer. The bank's safe actually is (almost) empty (2% liquidity is no exception). So in fact the bank created money it did not possess merely by typing a number in a computer. This virtual number gets in the starter's briefcase and is spread into the market; invisible (non-existing) coins are everywhere and people treat them as if they are real. In times of crises however the whole imaginarium falls to pieces and the debt-relay ends at the tax-payers; those are your 4X.

This is likely what most people think about banks "creating money out of the thin air". And this is obviously not what money multiplication is all about in reality. If the shown animation (or your description of it) had any semblance with reality, banks could create assets without balancing them with corresponding liabilities (this would make the whole idea of FRB null and void)...

Jumping in here. Money is base money plus credit, to the degree that the credit is transferable. Let me give a basic example.

Suppose a friend wants to sell a car. You want to buy it, but you don't have money. You make a deal that you pay later. Now your friend has a claim for money on you, and you have the goods. Next your friend wants to buy something from his friend. He says, I want that, but I have no money. But my other friend owes me, and when he pays, I can pay you. That is even if he has no money, he can spend the credit, and in case of saving he can also be assured that he has sufficient value saved for the future, without actually having the base money. He has only a claim. Even in this informal situation, money has been created from nothing in the form of credit, and it can be used for indirect exchange just as base money. The situation can be formalized as a bill of exchange, which change hands just like money. When the loans are paid back, this extra money disappears, but you can easily imagine that the procedure can be repeated immediately when the bill is cleared. So credit is money. There is no multiplication, there was nothing, then there was money. That is money creation.

[deisik]

In one sentence, this animation illustrates your misconception about "They can only lend money they have in deposits. Technically, they can in fact lend money they don't have, but they will have to close this imbalance as soon as possible..."

First off, at the banker's counter you see two balancing rows of people; 1. adding money to a deposit and 2. borrowing money from the bank. All's well and sound. Yet, those were the old days and that situation complies to "our" common sense about a bank's process. Nowadays though, when a starter needs money, he goes to a bank where the banker gives him credits by filling in numbers in a computer. The bank's safe actually is (almost) empty (2% liquidity is no exception). So in fact the bank created money it did not possess merely by typing a number in a computer. This virtual number gets in the starter's briefcase and is spread into the market; invisible (non-existing) coins are everywhere and people treat them as if they are real. In times of crises however the whole imaginarium falls to pieces and the debt-relay ends at the tax-payers; those are your 4X.

This is likely what most people think about banks "creating money out of the thin air". And this is obviously not what money multiplication is all about in reality. If the shown animation (or your description of it) had any semblance with reality, banks could create assets without balancing them with corresponding liabilities (this would make the whole idea of FRB null and void)...

Jumping in here. Money is base money plus credit, to the degree that the credit is transferable. Let me give a basic example.

Suppose a friend wants to sell a car. You want to buy it, but you don't have money. You make a deal that you pay later. Now your friend has a claim for money on you, and you have the goods. Next your friend wants to buy something from his friend. He says, I want that, but I have no money. But my other friend owes me, and when he pays, I can pay you. That is even if he has no money, he can spend the credit, and in case of saving he can also be assured that he has sufficient value saved for the future, without actually having the base money. He has only a claim. Even in this informal situation, money has been created from nothing in the form of credit, and it can be used for indirect exchange just as base money. The situation can be formalized as a bill of exchange, which change hands just like money. When the loans are paid back, this extra money disappears, but you can easily imagine that the procedure can be repeated immediately when the bill is cleared. So credit is money. There is no multiplication, there was nothing, then there was money. That is money creation.

Actually, you create money derivatives in the form of bills of exchange, bank receipts, IOUs, or whatever other kinds of claim...

But why are you telling me all this in the first place? I know this perfectly well and can say it even simpler. When you have a claim on me, you have an asset which you can just sell to the third party and get the money you need. But as a bank you needn't actually sell your claim (unless there is a bank-run) since it is a liquid asset which is considered as money, increases the balance and pays you interest. But every asset out there is balanced with a liability in this and every other case, so I would hardly call it "creating money out of the thin air", because for the most people (as can be seen from the above animation) it means creating assets (since money is an asset too) out of nowhere without at the same time being balanced by corresponding liabilities...

And this is what is called money multiplication, i.e. creating mutually extinguishing assets and liabilities

[Erdogan]

In one sentence, this animation illustrates your misconception about "They can only lend money they have in deposits. Technically, they can in fact lend money they don't have, but they will have to close this imbalance as soon as possible..."

First off, at the banker's counter you see two balancing rows of people; 1. adding money to a deposit and 2. borrowing money from the bank. All's well and sound. Yet, those were the old days and that situation complies to "our" common sense about a bank's process. Nowadays though, when a starter needs money, he goes to a bank where the banker gives him credits by filling in numbers in a computer. The bank's safe actually is (almost) empty (2% liquidity is no exception). So in fact the bank created money it did not possess merely by typing a number in a computer. This virtual number gets in the starter's briefcase and is spread into the market; invisible (non-existing) coins are everywhere and people treat them as if they are real. In times of crises however the whole imaginarium falls to pieces and the debt-relay ends at the tax-payers; those are your 4X.

This is likely what most people think about banks "creating money out of the thin air". And this is obviously not what money multiplication is all about in reality. If the shown animation (or your description of it) had any semblance with reality, banks could create assets without balancing them with corresponding liabilities (this would make the whole idea of FRB null and void)...

Jumping in here. Money is base money plus credit, to the degree that the credit is transferable. Let me give a basic example.

Suppose a friend wants to sell a car. You want to buy it, but you don't have money. You make a deal that you pay later. Now your friend has a claim for money on you, and you have the goods. Next your friend wants to buy something from his friend. He says, I want that, but I have no money. But my other friend owes me, and when he pays, I can pay you. That is even if he has no money, he can spend the credit, and in case of saving he can also be assured that he has sufficient value saved for the future, without actually having the base money. He has only a claim. Even in this informal situation, money has been created from nothing in the form of credit, and it can be used for indirect exchange just as base money. The situation can be formalized as a bill of exchange, which change hands just like money. When the loans are paid back, this extra money disappears, but you can easily imagine that the procedure can be repeated immediately when the bill is cleared. So credit is money. There is no multiplication, there was nothing, then there was money. That is money creation.

Actually, you create money derivatives in the form of bills of exchange, bank receipts, or whatever other kinds of claim...

But why are you telling me all this in the first place? I know this perfectly well and can say it even simpler. When you have a claim on me, you have an asset which you can just sell to the third party and get the money you need. But as a bank you needn't actually sell your claim (unless there is a bank-run) since it is a liquid asset which is considered as money, increases the balance and pays you interest. But every asset out there is balanced with a liability in this and every other case, so I would hardly call it "creating money out of the thin air", because for the most people (as can be seen from the above animation) it means creating assets (since money is an asset too) out of nowhere without at the same time being balanced by corresponding liabilities...

And this is what called money multiplication, i.e. creating mutually extinguishing assets and liabilities

It is only you insisting that it is not money creation. Money supply can be understood as the base money plus the extensions. The money supply is the sum of money. It increases with credit, it will debase the money just as creation of new notes and coins, and it leads to increasing prices on goods measured in the money unit. Normal people do not see a bank deposit as something different from base money. When they talk about paying a house for cash, they really mean transfering the claim of money that the content of the account is, to the seller, who then owns the claim. They even regard the account as better money, as those money are easier to move around. So I don't propose that lending creates base money, but extensions that are just as good as money, assuming there is no risk in the credit. Therefore it is proper to call it money creation.

[deisik]

Jumping in here. Money is base money plus credit, to the degree that the credit is transferable. Let me give a basic example.

Suppose a friend wants to sell a car. You want to buy it, but you don't have money. You make a deal that you pay later. Now your friend has a claim for money on you, and you have the goods. Next your friend wants to buy something from his friend. He says, I want that, but I have no money. But my other friend owes me, and when he pays, I can pay you. That is even if he has no money, he can spend the credit, and in case of saving he can also be assured that he has sufficient value saved for the future, without actually having the base money. He has only a claim. Even in this informal situation, money has been created from nothing in the form of credit, and it can be used for indirect exchange just as base money. The situation can be formalized as a bill of exchange, which change hands just like money. When the loans are paid back, this extra money disappears, but you can easily imagine that the procedure can be repeated immediately when the bill is cleared. So credit is money. There is no multiplication, there was nothing, then there was money. That is money creation.

Actually, you create money derivatives in the form of bills of exchange, bank receipts, or whatever other kinds of claim...

But why are you telling me all this in the first place? I know this perfectly well and can say it even simpler. When you have a claim on me, you have an asset which you can just sell to the third party and get the money you need. But as a bank you needn't actually sell your claim (unless there is a bank-run) since it is a liquid asset which is considered as money, increases the balance and pays you interest. But every asset out there is balanced with a liability in this and every other case, so I would hardly call it "creating money out of the thin air", because for the most people (as can be seen from the above animation) it means creating assets (since money is an asset too) out of nowhere without at the same time being balanced by corresponding liabilities...

And this is what called money multiplication, i.e. creating mutually extinguishing assets and liabilities

It is only you insisting that it is not money creation. Money supply can be understood as the base money plus the extensions. The money supply is the sum of money. It increases with credit, it will debase the money just as creation of new notes and coins, and it leads to increasing prices on goods measured in the money unit. Normal people do not see a bank deposit as something different from base money. When they talk about paying a house for cash, they really mean transfering the claim of money that the content of the account is, to the seller, who then owns the claim. They even regard the account as better money, as those money are easier to move around. So I don't propose that lending creates base money, but extensions that are just as good as money, assuming there is no risk in the credit. Therefore it is proper to call it money creation.

I never insisted on anything of the kind. If you read my posts closely enough (which you obviously don't do), I always added in every post that money creation in reality is not what most people think about it (i.e "creating assets out of the thin air") and the above animation just confirms that...

Money multiplication (which is the correct term) by definition means "money creation" in the process as I described it

[Erdogan]

Jumping in here. Money is base money plus credit, to the degree that the credit is transferable. Let me give a basic example.

Suppose a friend wants to sell a car. You want to buy it, but you don't have money. You make a deal that you pay later. Now your friend has a claim for money on you, and you have the goods. Next your friend wants to buy something from his friend. He says, I want that, but I have no money. But my other friend owes me, and when he pays, I can pay you. That is even if he has no money, he can spend the credit, and in case of saving he can also be assured that he has sufficient value saved for the future, without actually having the base money. He has only a claim. Even in this informal situation, money has been created from nothing in the form of credit, and it can be used for indirect exchange just as base money. The situation can be formalized as a bill of exchange, which change hands just like money. When the loans are paid back, this extra money disappears, but you can easily imagine that the procedure can be repeated immediately when the bill is cleared. So credit is money. There is no multiplication, there was nothing, then there was money. That is money creation.

Actually, you create money derivatives in the form of bills of exchange, bank receipts, or whatever other kinds of claim...

But why are you telling me all this in the first place? I know this perfectly well and can say it even simpler. When you have a claim on me, you have an asset which you can just sell to the third party and get the money you need. But as a bank you needn't actually sell your claim (unless there is a bank-run) since it is a liquid asset which is considered as money, increases the balance and pays you interest. But every asset out there is balanced with a liability in this and every other case, so I would hardly call it "creating money out of the thin air", because for the most people (as can be seen from the above animation) it means creating assets (since money is an asset too) out of nowhere without at the same time being balanced by corresponding liabilities...

And this is what called money multiplication, i.e. creating mutually extinguishing assets and liabilities

It is only you insisting that it is not money creation. Money supply can be understood as the base money plus the extensions. The money supply is the sum of money. It increases with credit, it will debase the money just as creation of new notes and coins, and it leads to increasing prices on goods measured in the money unit. Normal people do not see a bank deposit as something different from base money. When they talk about paying a house for cash, they really mean transfering the claim of money that the content of the account is, to the seller, who then owns the claim. They even regard the account as better money, as those money are easier to move around. So I don't propose that lending creates base money, but extensions that are just as good as money, assuming there is no risk in the credit. Therefore it is proper to call it money creation.

I never insisted on anything of the kind. If you read my posts closely enough (which you obviously don't do), I always added in every post that money creation in reality is not what most people think about it (i.e "creating assets out of the thin air") and the above animation just confirms that...

You:

I would hardly call it "creating money out of the thin air"

You:

And this is what called money multiplication

The money multiplication with regard to fractional reserve, comes into play when a fraction of the deposited money is lent out. The loaner may deposit the money back to the same bank, or buy something from someone who deposit them back to the bank. When they are redeposited, a fraction of that money can be lent out again, and so on. So the same money can in effect partially be lent out multiple times. This is the money multiplication, and the multiplier depends on the fraction that the bank does not lend out, the fractional reserve.

A condition for multiplication is also that the deposits are on demand, while the loans have a timeframe. You can get your deposits out immediately, but the bank has to notify the loaner that it wants the money back some time in advance according to the loan contract.

You might be in agreement with this, if so either I have misread or you have expressed it unclearly. Talking about assets and interest is not necessary to explain the concept of money creation and money multiplication.

[deisik]

I never insisted on anything of the kind. If you read my posts closely enough (which you obviously don't do), I always added in every post that money creation in reality is not what most people think about it (i.e "creating assets out of the thin air") and the above animation just confirms that...

You:

I would hardly call it "creating money out of the thin air"

You:

And this is what called money multiplication

The money multiplication with regard to fractional reserve, comes into play when a fraction of the deposited money is lent out. The loaner may deposit the money back to the same bank, or buy something from someone who deposit them back to the bank. When they are redeposited, a fraction of that money can be lent out again, and so on. So the same money can in effect partially be lent out multiple times. This is the money multiplication, and the multiplier depends on the fraction that the bank does not lend out, the fractional reserve.

A condition for multiplication is also that the deposits are on demand, while the loans have a timeframe. You can get your deposits out immediately, but the bank has to notify the loaner that it wants the money back some time in advance according to the loan contract.

You might be in agreement with this, if so either I have misread or you have expressed it unclearly. Talking about assets and interest is not necessary to explain the concept of money creation and money multiplication.

You talk in particulars, but I give you the principle by which money multiplication operates, i.e. creating asset-liability pairs which are separated (i.e. can be used on their own) but mutually extinguishing and which increase balance thus multiplying money. You are just citing wikipedia (if I'm not mistaken) which gives details but doesn't explain the principle behind it (just bringing about further confusion about "money creation")

I don't know how you could misread or missed that part:

And this is what called money multiplication, i.e. creating mutually extinguishing assets and liabilities

[Erdogan]

I never insisted on anything of the kind. If you read my posts closely enough (which you obviously don't do), I always added in every post that money creation in reality is not what most people think about it (i.e "creating assets out of the thin air") and the above animation just confirms that...

You:

I would hardly call it "creating money out of the thin air"

You:

And this is what called money multiplication

The money multiplication with regard to fractional reserve, comes into play when a fraction of the deposited money is lent out. The loaner may deposit the money back to the same bank, or buy something from someone who deposit them back to the bank. When they are redeposited, a fraction of that money can be lent out again, and so on. So the same money can in effect partially be lent out multiple times. This is the money multiplication, and the multiplier depends on the fraction that the bank does not lend out, the fractional reserve.

A condition for multiplication is also that the deposits are on demand, while the loans have a timeframe. You can get your deposits out immediately, but the bank has to notify the loaner that it wants the money back some time in advance according to the loan contract.

You might be in agreement with this, if so either I have misread or you have expressed it unclearly. Talking about assets and interest is not necessary to explain the concept of money creation and money multiplication.

You talk in particulars, but I give you the principle by which money multiplication operates, i.e. creating asset-liability pairs which are separated (i.e. can be used on their own) but mutually extinguishing and which increase balance thus multiplying money. You are just citing wikipedia (if I'm not mistaken) which gives details but doesn't explain the principle behind it (just bringing about further confusion about "money creation")

I don't know how you could misread or missed that part:

And this is what called money multiplication, i.e. creating mutually extinguishing assets and liabilities

I don't know why you want to hammer this. What I write is my understanding after reading Mises, it is not from Wikipedia.

Money multiplication comes from fractional reserve banking. The multiplier can be 10 or more, depending of the reserve fraction. All lending creates money. I suppose you could say that a straight tradable loan has the multiplier of 2.

There is no arguing that the created money disappears when the loan is paid back or otherwise cleared. That is the reason heavy credit creation poses a systemic risk. The current situation is that credit created by lending including fractional reserve is 10 times the base money supply, and a substantial part of the loans should have been cleared. In stead of marking the loan as defaulted or having a low value due to risk, banks, with the help of central banks, still hold these on the books with the nominal value.

[Xav]

But every asset out there is balanced with a liability in this and every other case, so I would hardly call it "creating money out of the thin air"

According "their books" that is. Most of us are glad that Bitcoin multiplication (aka double spending) is not possible. Moreover, what you call "balanced with liability" is in fact passing a debt into a very complicated debt-relay-system based on pseudo-scientific probability-calculations. May I recommend two great movies; Margin Call and Cosmopolis?

[deisik]

But every asset out there is balanced with a liability in this and every other case, so I would hardly call it "creating money out of the thin air"

According "their books" that is. Most of us are glad that Bitcoin multiplication (aka double spending) is not possible. Moreover, what you call "balanced with liability" is in fact passing a debt into a very complicated debt-relay-system based on pseudo-scientific probability-calculations. May I recommend two great movies; Margin Call and Cosmopolis?

I don't think you can equate (Bitcoin) multiplication with double spending. As said before, under the process of money multiplication you don't create actual money (so there is no double spending), you create money derivatives (claims of different kinds) which just work and are counted as money (and can be exchanged for "real" money). I see no reasons why Bitcoin should be any different in this aspect. If you do, bring them forward...

Actually, the whole thread is about this (Bitcoin derivatives)

[deisik]

You talk in particulars, but I give you the principle by which money multiplication operates, i.e. creating asset-liability pairs which are separated (i.e. can be used on their own) but mutually extinguishing and which increase balance thus multiplying money. You are just citing wikipedia (if I'm not mistaken) which gives details but doesn't explain the principle behind it (just bringing about further confusion about "money creation")

I don't know how you could misread or missed that part:

And this is what called money multiplication, i.e. creating mutually extinguishing assets and liabilities

I don't know why you want to hammer this. What I write is my understanding after reading Mises, it is not from Wikipedia.

Money multiplication comes from fractional reserve banking. The multiplier can be 10 or more, depending of the reserve fraction. All lending creates money. I suppose you could say that a straight tradable loan has the multiplier of 2.

There is no arguing that the created money disappears when the loan is paid back or otherwise cleared. That is the reason heavy credit creation poses a systemic risk. The current situation is that credit created by lending including fractional reserve is 10 times the base money supply, and a substantial part of the loans should have been cleared. In stead of marking the loan as defaulted or having a low value due to risk, banks, with the help of central banks, still hold these on the books with the nominal value.

Because people continue to repeat that nonsense about creating money out of thin air since they don't understand how money multiplication (or money creation if you please) actually works. Peeps think that bankers just enter into the Excel spreadsheet some arbitrary number that magically becomes money. And they even bring about animations that aim to allegedly discredit FRB and which in fact wouldn't ever be possible if there were some reserve requirements (what FRB is about) in the first place...

Also, money multiplication in no case comes from fractional reserve banking. In fact, FRB limits money multiplication, without the latter the former would be just fine...

[aminorex]

But every asset out there is balanced with a liability in this and every other case, so I would hardly call it "creating money out of the thin air", because for the most people (as can be seen from the above animation) it means creating assets (since money is an asset too) out of nowhere without at the same time being balanced by corresponding liabilities...

You just create both assets and liabilities at the same time.  They are both made of air.  It is done every day.

[Xav]

But every asset out there is balanced with a liability in this and every other case, so I would hardly call it "creating money out of the thin air"

According "their books" that is. Most of us are glad that Bitcoin multiplication (aka double spending) is not possible. Moreover, what you call "balanced with liability" is in fact passing a debt into a very complicated debt-relay-system based on pseudo-scientific probability-calculations. May I recommend two great movies; Margin Call and Cosmopolis?

I don't think you can equate (Bitcoin) multiplication with double spending. As said before, under the process of money multiplication you don't create actual money (so there is no double spending), you create money derivatives (claims of different kinds) which just work and counted as money (and can be exchanged for "real" money). I see no reasons why Bitcoin should be any different in this aspect. If you do, bring them forward...

Actually, the whole thread is about this (Bitcoin derivatives)

Actually you are asking me to explain "their books", which is a giant set of "derivatives" and other crazy financial inventions. In short, it comes to this; "their books" describe the value of their assets. The crux is that banks pretend to (already) own that money and use this to lend money. Bitcoin does not allow any pretense; i.e. a Bitcoin account represents 'real' (haha) digi-coins.

Here is another animation about "derivatives" (sorry, again in Dutch):
http://www.trosradar.nl/standalone-player/aflevering/16-12-2013/derivaten/#sites/radarextra/animaties/

[aminorex]

My addition is that it is not banks that change the velocity of money, or rather a primary driver for that. Banks are just an instrument to make it possible whenever it is required, a sports car where economy is the driver...

What is going to take the place of this sports car in case there are no more banks?

Actual velocity.  I.e. instead of velocity coming from rent-seekers, it comes from productive economic activity.  You see cause and effect reversed because interest is friction, so the system deriving interest must add energy, but without interest, there is no friction, and actual productive activity is no longer damped.  The velocity comes from transactions which feed organic growth.

[deisik]

But every asset out there is balanced with a liability in this and every other case, so I would hardly call it "creating money out of the thin air", because for the most people (as can be seen from the above animation) it means creating assets (since money is an asset too) out of nowhere without at the same time being balanced by corresponding liabilities...

You just create both assets and liabilities at the same time.  They are both made of air.  It is done every day.

Yes, this is exactly what my point is about. But for most people, it is just assets that got created as we could witness from the animation presented (as I got it)...

[deisik]

My addition is that it is not banks that change the velocity of money, or rather a primary driver for that. Banks are just an instrument to make it possible whenever it is required, a sports car where economy is the driver...

What is going to take the place of this sports car in case there are no more banks?

Actual velocity.  I.e. instead of velocity coming from rent-seekers, it comes from productive economic activity.  You see cause and effect reversed because interest is friction, so the system deriving interest must add energy, but without interest, there is no friction, and actual productive activity is no longer damped.  The velocity comes from transactions which feed organic growth.

The economy would toddle and you still have to deal with my primary concern about the banks (or absence thereof) in case of bitcoin economy. How are you going to accumulate means in order to finance new growth?

[aminorex]

The economy would toddle and you still have to deal with my primary concern about the banks (or absence thereof) in case of bitcoin economy. How are you going to accumulate means in order to finance new growth?

Capital formation occurs in a multitude of ways, quite apart from banks.  Banks provide a tiny, insignificant portion of capital formation, as anyone who has considered funding options for a business enterprise well knows. 

[deisik]

The economy would toddle and you still have to deal with my primary concern about the banks (or absence thereof) in case of bitcoin economy. How are you going to accumulate means in order to finance new growth?

Capital formation occurs in a multitude of ways, quite apart from banks.  Banks provide a tiny, insignificant portion of capital formation, as anyone who has considered funding options for a business enterprise well knows. 

I don't know where you live, but in my quarters when businesses want to gain capital either to expand production or buy new equipment to remain competitive, they all go to banks for loans...

[deisik]

But every asset out there is balanced with a liability in this and every other case, so I would hardly call it "creating money out of the thin air"

According "their books" that is. Most of us are glad that Bitcoin multiplication (aka double spending) is not possible. Moreover, what you call "balanced with liability" is in fact passing a debt into a very complicated debt-relay-system based on pseudo-scientific probability-calculations. May I recommend two great movies; Margin Call and Cosmopolis?

I don't think you can equate (Bitcoin) multiplication with double spending. As said before, under the process of money multiplication you don't create actual money (so there is no double spending), you create money derivatives (claims of different kinds) which just work and counted as money (and can be exchanged for "real" money). I see no reasons why Bitcoin should be any different in this aspect. If you do, bring them forward...

Actually, the whole thread is about this (Bitcoin derivatives)

Actually you are asking me to explain "their books", which is a giant set of "derivatives" and other crazy financial inventions. In short, it comes to this; "their books" describe the value of their assets. The crux is that banks pretend to (already) own that money and use this to lend money. Bitcoin does not allow any pretense; i.e. a Bitcoin account represents 'real' (haha) digi-coins.

Here is another animation about "derivatives" (sorry, again in Dutch):
http://www.trosradar.nl/standalone-player/aflevering/16-12-2013/derivaten/#sites/radarextra/animaties/

I didn't understand your idea, but if you lend somebody bitcoins, you get a claim on them which would be an asset that you can either sell for actual bitcoins (with discount for a long term loan in case you need money) or just use instead of them. Thus you have effectively multiplied bitcoins without double spending them. I don't really see how Bitcoin is different in this aspect from gold, fiat of whatever...

[Xav]

But every asset out there is balanced with a liability in this and every other case, so I would hardly call it "creating money out of the thin air"

According "their books" that is. Most of us are glad that Bitcoin multiplication (aka double spending) is not possible. Moreover, what you call "balanced with liability" is in fact passing a debt into a very complicated debt-relay-system based on pseudo-scientific probability-calculations. May I recommend two great movies; Margin Call and Cosmopolis?

I don't think you can equate (Bitcoin) multiplication with double spending. As said before, under the process of money multiplication you don't create actual money (so there is no double spending), you create money derivatives (claims of different kinds) which just work and counted as money (and can be exchanged for "real" money). I see no reasons why Bitcoin should be any different in this aspect. If you do, bring them forward...

Actually, the whole thread is about this (Bitcoin derivatives)

Actually you are asking me to explain "their books", which is a giant set of "derivatives" and other crazy financial inventions. In short, it comes to this; "their books" describe the value of their assets. The crux is that banks pretend to (already) own that money and use this to lend money. Bitcoin does not allow any pretense; i.e. a Bitcoin account represents 'real' (haha) digi-coins.

Here is another animation about "derivatives" (sorry, again in Dutch):
http://www.trosradar.nl/standalone-player/aflevering/16-12-2013/derivaten/#sites/radarextra/animaties/

I didn't understand your idea, but if you lend somebody bitcoins, you get a claim on them which would be an asset that you can either sell for actual bitcoins (with discount for a long term loan in case you need money) or just use instead of them. Thus you have effectively multiplied bitcoins without double spending them. I don't really see how Bitcoin is different in this aspect from gold, fiat of whatever...

You don't get my "idea"? Well, maybe I talk nonsense to you, but I do understand the essential difference between a number representing an amount of money and a Bitcoint account, which actually IS the money.

[deisik]

Actually you are asking me to explain "their books", which is a giant set of "derivatives" and other crazy financial inventions. In short, it comes to this; "their books" describe the value of their assets. The crux is that banks pretend to (already) own that money and use this to lend money. Bitcoin does not allow any pretense; i.e. a Bitcoin account represents 'real' (haha) digi-coins.

Here is another animation about "derivatives" (sorry, again in Dutch):
http://www.trosradar.nl/standalone-player/aflevering/16-12-2013/derivaten/#sites/radarextra/animaties/

I didn't understand your idea, but if you lend somebody bitcoins, you get a claim on them which would be an asset that you can either sell for actual bitcoins (with discount for a long term loan in case you need money) or just use instead of them. Thus you have effectively multiplied bitcoins without double spending them. I don't really see how Bitcoin is different in this aspect from gold, fiat of whatever...

You don't get my "idea"? Well, maybe I talk nonsense to you, but I do understand the essential difference between a number representing an amount of money and a Bitcoint account, which actually IS the money.

If I don't understand something, it doesn't in the least mean that it is nonsense or I think it is. Be sure of that, but nevertheless address my point from my previous post (about effectively multiplying bitcoins through lending). I'm primarily concerned with that part about double spending..