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Author Topic: Inflation, Fractional Reserve, and Bitcoins  (Read 14594 times)
EvgenijM86
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July 18, 2010, 11:45:54 PM
 #41

My argument is based on government force, yes, in the form of legal tender laws.  This is because although bitcoins are a free market now, if they become anywhere near popular enough to make a dent in the dollar, there will be government force in play.  My initial claim was that plucking out dollars from the economy and dropping in bitcoins would be just as inflation-riddled as today.  This is because the government force which causes dollars to be inflationary is still in play under a bitcoin system - I.e. nothing about using bitcoins eliminates the government's ability to make legal tender laws for fake-bitcoin notes (digital or otherwise).  To claim that bitcoins, if widely used, would remain a free market is naive - the government, any government, will not give up its power without a fight.
Yes, but you know - spears are good for a lot of things, they are not, however, good for sitting on them. To control BitCoin you need a true totalitarian country, and those regimes won't last long. The only reason the current system is relatively stable is because general public find it acceptable.

I did not say that you would not be able to take BTC for the house.  I said that if Q-BTC (Fake backless Bitcoin-denominated loans) were legal tender, then if the buyer offered you Q-BTC and you refused, the courts would give him the house anyway.  If he chose to give you BTC, then that's fine - take them and be happy he's not ripping you off with backless currency.  However, if he offered you Q-BTC, you couldn't reject it because its not real BTC.
Wow, that's some totalitarian country you live in if you can't exchange your property for what you want. In my case I would rather burn down the house if court ruled it that way (even if I will have go to jail for it).

As as "who could prove...," I can only assume that you're talking about taxation.  That very "proving" is what IRS Auditors are for....that's another discussion altogether.
I was talking about avoiding Q-BTC. If governments forces to accept them then I will simply try to avoid the laws of that governments to best of my ability.
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InterArmaEnimSil
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July 19, 2010, 12:55:10 AM
 #42

Yes, but you know - spears are good for a lot of things, they are not, however, good for sitting on them. To control BitCoin you need a true totalitarian country, and those regimes won't last long. The only reason the current system is relatively stable is because general public find it acceptable.
I question how totalitarian it would have to be.  Yes, it would be more difficult than controlling dollars...but there certainly would be ways, given social engineering, malware, whatever, to de-anonymize the swarm and track the motion of its funds.

Wow, that's some totalitarian country you live in if you can't exchange your property for what you want. In my case I would rather burn down the house if court ruled it that way (even if I will have go to jail for it).
Sarcasm about how terrible such a theoretical country is gets us nowhere.
Its the USA, Great Britain, France, and every other nation, my friend.  Go, sell your car.  When you agree on the price in dollars and he pulls out the bills, say "I'll take that in silver bullion only."  Under the law, because you are refusing legal tender payment, the debt owed to you is void.  Would the buyer know this?  Probably not...but if he did, he could sue you for the car and win.

I was talking about avoiding Q-BTC. If governments forces to accept them then I will simply try to avoid the laws of that governments to best of my ability.

Evasion of the law is not the same as a sound system operating within the law, and I would hate to think that for Bitcoins to operate well, we'd all have to be criminals.

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July 19, 2010, 01:05:23 AM
 #43

My point with this entire thread was simply to dispel the false notion that printing presses are to blame for inflation.  Loans are the real culprit, with no need to waste paper, ink, and electricity on printing.  Taking today's economy lifting out dollars and dropping in bitcoins and continuing on would have the same loan rules, and thus would have the same inflation, minus only the very small percentage that is due to printing presses.

This is wrong. Loans multiply the printed money by a fixed factor but the root of inflation is the printing. Printed fiat money has inflation problems; the more money printed the greater the inflation. Gold does not, despite being lent and banked just like other kinds of money. This is simply because mining gold is hard while printing paper money is easy.

The Zimbabwean dollar is a very clear example. Was the huge inflation caused by people being really enthusiastic about lending and borrowing Z$? Or was it caused by the government printing 100 000 000 000 000-dollar bills?

Yes, most of the money in circulation is created through loans. No, that is not the cause of ongoing inflation.

The Zimbabwe case is different from the present US case.  Was the money printed, causing inflation, or did the money get created by loans, and then get printed so that people could take the loans in cash?  The order does not matter.  In Zimbabwe, it was the first order.  In the US, it is the second.  Money is not printed to finance anything - its printed so that already-created liquidity from "magic loans" can be taken in the form of wallet-stuffing.  In original fractional reserve banking, loans were only a fixed portion of the actual, printed money supply, which was limited only because the Treasury turned off the presses.  You're right about that.  That rate fell and fell, though, until it was last seen at 9% or so.  At that point, as far as I know, the fractional reserve requirement rate was eliminated, at least for most kinds of organizational and government loans.  Yes, your local bank that gives you a car loan is limited by law in how many car or house loans they can give, but the issuance of government bonds, the main driving force of inflation, is not.  The money is printed only to supply people with technology-free access to the already-created liquidity.  It does indeed inflate the economy, and in Zimbabwe it was the primary cause.  In the US it is secondary to Fed loans which are "paper-ized" only later, when they are needed in wallets.  Again, do you think that the loans given to F&F were all printed?  They money didn't exist in paper form, yet the banks were still "propped up."  Most of it has yet to be manifest in paper.  Of course, this paper does inflate the economy - a digital loan is not "converted" to paper, simply, more paper, which is liquidity in its own right, is printed so that Joe Schmoe can take the dollar bills he wants.  Still, though, non-cash inflation is a far larger problem in the developed world than paper inflation.

Regardless, this does not address the legal tender issue.  If Q-BTC were legal tender, then the inflation-proof nature of BTC based on the limited ability to generate coins would be moot.

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EvgenijM86
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July 19, 2010, 01:22:42 AM
 #44

Sarcasm about how terrible such a theoretical country is gets us nowhere.
Its the USA, Great Britain, France, and every other nation, my friend.  Go, sell your car.  When you agree on the price in dollars and he pulls out the bills, say "I'll take that in silver bullion only."  Under the law, because you are refusing legal tender payment, the debt owed to you is void.  Would the buyer know this?  Probably not...but if he did, he could sue you for the car and win.
That may be, but it has to be after the actual deal was signed by both parties, right? If I create a contract upfront which states that I only accept "X" then, if he signs it - he will have to follow it. Before any signs are placed the property still belongs to me - is it not? If they think they can rob me just for refusing to accept X _before_ the actual deal, then I will accept tender and burn it with the car.
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July 19, 2010, 01:37:44 AM
 #45

You are changing the terms from the previous debate now.  Previously you were talking about bank balances, now you are talking about federal reserve notes.  Nobody has to accept bank balances.  Yes, the government can print money, but that is a different process from magicking money into existence by changing the ledger lines in a bank.

I am not changing terms.  Federal Reserve Notes == Balance with Federal Reserve Bank of the US.  Equally worthless, because each is backed by nothing. 

Also, Federal Reserve Notes == Dollars, whether those dollars are printed, or not.  The granting of Federal Reserve Loans (and thus the inflation of the value of Federal Reserve Notes) by "magicking" loans is no different in its effect on the economy from printing money.  Do you think that with the Fed gives Fannie and Freddie one trillion dollars, they actually print these dollars?  No.  The dollars may or may not be printed later on, if there becomes a need for them to be stuffed in someone's pocket.  Until someone demands them as wallet-filler, though, they exist only in the form of balances in accounts.  Most dollars are *never* requested as cash, and therefore, never printed.  They're circulated by means of checks, credit and debit cards, Automated Clearing House transfers, wires, Paypal payments, etc.  As they can move goods in this "unprinted" form, they "exist," but are backed by nothing other than a loan by the Fed or another bank.  Thus, they are bank balances and nothing more, whether printed or not.

Sure, but as a business you do not have to accept bank balances as payment.  If you don't accept checks, debit card or credit cards there is no way for you to accept bank balances.  I have patronized several different businesses which only accept cash payments, there is nothing illegal about this.  I know that cash=federal reserve notes and is not backed by anything, but there is still a distinct difference between printing money and magicking it into existence with double entry book keeping.  The inflationary result may not be any different but the process certainly is and if, for instance, I have a hot dog business which takes only cash, but I allow regular customers to run a tab, their debt to me is not going to be wiped out when I say that I cannot accept a check, debit card, or credit card payment to clear their tab. 

InterArmaEnimSil
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July 19, 2010, 03:51:56 AM
 #46

That may be, but it has to be after the actual deal was signed by both parties, right? If I create a contract upfront which states that I only accept "X" then, if he signs it - he will have to follow it. Before any signs are placed the property still belongs to me - is it not? If they think they can rob me just for refusing to accept X _before_ the actual deal, then I will accept tender and burn it with the car.

You raise a very good point.  My inclination is to say that no, you're not permitted to enter into a contract in which legal tender is not *an* (not necessarily the only) accepted modicum of exchange.  Just like you're not allowed to enter into a contract as a landlord that says you can evict a person on zero notice - the tenant is protected by legal proceedings and warnings, etc, and you cannot enter into a contract which breaks these laws.  However, this does seem to be rather counterintuitive....I will do some research on legal tender laws and see how the law stands in the US.

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July 19, 2010, 04:08:44 AM
 #47

Sure, but as a business you do not have to accept bank balances as payment.  If you don't accept checks, debit card or credit cards there is no way for you to accept bank balances.  I have patronized several different businesses which only accept cash payments, there is nothing illegal about this.  I know that cash=federal reserve notes and is not backed by anything, but there is still a distinct difference between printing money and magicking it into existence with double entry book keeping.  The inflationary result may not be any different but the process certainly is and if, for instance,

You don't have to accept the balance of any little bank out there.  You *do* have to accept bank balance of the US Fed.  Dollars are, by definition, US Fed Bank balance, and you must accept them.  What form they take - credit card, check, cash, money order - doesn't matter.

Is computerized loan-giving different from printing money?  Yes, in that people can't put it in their wallets.  However, it has an *identical* effect on the economy as a whole, because it inflates the amount of liquidity in play.  This liquidity is in play whether or not it is actually printed.  Could all privately-owned businesses refuse to accept anything but cash?  Sure.  If we boycott the banks entirely by using only cash, we eliminate their ability to inflate the economy.  However, as long as banks are in play at all, the giving of loans is identical in its effect on the economy as the printing of money.  Also, we *cannot* legally boycott the Fed Bank.  So, we could eliminate the power of all banks except the Fed to inflate the economy, but we can't boycott *all* the banks.
 
I have a hot dog business which takes only cash, but I allow regular customers to run a tab, their debt to me is not going to be wiped out when I say that I cannot accept a check, debit card, or credit card payment to clear their tab.  

I agree.  However, you are once again mistaking credit for "credit card."  Printed US money - cash - is Fed credit.  You must accept it.  Knowing that cash is credit and is backless, you might demand gold, silver, bitcoins, or oil, for your hot dogs.  You are not permitted to do this.  You *must* accept Fed bank balance - cash. (Note that you officially must accept *something* denominated in Fed Bank Balance Dollars.  So, a business may refuse cash, or credit cards, or checks, as long as they take *some* form of dollars, *all* of which are equally US Fed Bank Credit).

Think of it this way.

You own a hot dog stand that takes Bitcoins. You carry on for a few years, everything is fine.  The government passes a law which says "You must accept our electronic Bitcoin-Account-Denominated coins (BADcoins) as if they were BTC.  We can't print more Bitcoins, so these BADcoins are not backed by anything.  However, you must accept them.  We're digitally creating 1 bilion bitcoins worth of this stuff tomorrow morning."  Suddenly, the government might as well be able to print as many bitcoins as it wants, because it can print BADcoins, which you are forced to accept.  Also, it authorizes any bank to digitally create BADcoins if that bank can attract customers.  If a private bank can't attract customers - which you're describing - then that bank can't inflate the economy, no.  But the Legal Tender Reserve Bank - be it the Fed or the BADBitCoinBank or whatever, can, and will.

That is the current system, and why Bitcoins are not inflation-proof.

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July 19, 2010, 04:26:38 AM
 #48

Your argument is based on government force, not on a free market. The same can happen with banks if government forces it's citizen not to use bank payments. In free market BC can dominate bank system.

My argument is based on government force, yes, in the form of legal tender laws.  This is because although bitcoins are a free market now, if they become anywhere near popular enough to make a dent in the dollar, there will be government force in play.  My initial claim was that plucking out dollars from the economy and dropping in bitcoins would be just as inflation-riddled as today.  This is because the government force which causes dollars to be inflationary is still in play under a bitcoin system - I.e. nothing about using bitcoins eliminates the government's ability to make legal tender laws for fake-bitcoin notes (digital or otherwise).  To claim that bitcoins, if widely used, would remain a free market is naive - the government, any government, will not give up its power without a fight.

In your example I would simply try to form it as a gift, well, for some BC of-course, but who can prove that I received them and received them for the house?

I did not say that you would not be able to take BTC for the house.  I said that if Q-BTC (Fake backless Bitcoin-denominated loans) were legal tender, then if the buyer offered you Q-BTC and you refused, the courts would give him the house anyway.  If he chose to give you BTC, then that's fine - take them and be happy he's not ripping you off with backless currency.  However, if he offered you Q-BTC, you couldn't reject it because its not real BTC.

As as "who could prove...," I can only assume that you're talking about taxation.  That very "proving" is what IRS Auditors are for....that's another discussion altogether.

One advantage here is that bitcoins are NOT legal tender, nor are they likely to become so.  The government is not going to surrender their control of money to something printed by everyone.

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July 19, 2010, 07:05:29 AM
 #49

One advantage here is that bitcoins are NOT legal tender, nor are they likely to become so.  The government is not going to surrender their control of money to something printed by everyone.
Indeed  Roll Eyes

It appears that Bitcoin was designed to be free and private.  If the system became subject to government force, what point would there be in using it?  Just go with PayPal  Wink

The claim that governments wouldn't give up power without a fight is certainly correct.  However, many governments are already losing that fight, and free and private currencies like Bitcoin will just facilitate the process.
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July 19, 2010, 08:21:20 AM
 #50

Was the money printed, causing inflation, or did the money get created by loans, and then get printed so that people could take the loans in cash?  The order does not matter.

Exactly. If they stop printing, inflation stops.

Suppose it didn't. The central bank stops printing but inflation continues. After some time an apple costs $10000. People will try to withdraw cash from their banks but can't because the cash simply does not exist. *poooof* Collapsed banks and a massive appreciation of the currency.
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July 20, 2010, 12:43:51 AM
 #51

Cross-posted from "http://bitcointalk.org/index.php?topic=57.60"

I would recommend everyone read "How an economy grows (and why it doesn't)" by Irwin Schiff. In graphic novel format, it's an easy introduction to the basics of economics and on how an honest banking system becomes dishonest. It's quite relevant to this thread and other threads about Bitcoin, actually.

"How an economy grows (and why it doesn't)"

http://freedom-school.com/money/how-an-economy-grows.pdf

Want to thank me for this post? Donate here! Flip your coins over to: 13Cq8AmdrqewatRxEyU2xNuMvegbaLCvEe  Smiley
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July 21, 2010, 01:02:42 PM
 #52

If the probability of bank runs is very small, then fractional reserve banking works.  Or, in other words, if banks can establish and maintain trust in their ability to repay deposits they'll be stable even if they practice fractional reserve banking.

I hope we'll eventually find out the hard way if, or which, Bitcoin banks can establish and maintain trust.


It does not solve the essential problem of there being two claims to the same property simultaneously, which is the fundamental flaw in all Fractional Reserve Systems.  I agree that people should be free to bank with whomever they choose, fractional reserve or otherwise, but you should do so knowing fundamentally that the institution is bankrupt.

Fractional reserve banking only works[1] because of the FDIC insurance system.  Depositors will be bailed out with depreciated funds due to their bank's profligacy and that's what creates the trust which exists in this system.  When the confidence that the FDIC will be able to pay depositors, well, then the system has reached its limit.

Bank Runs in the classic sense don't happen now.  Digits are moved from one bankrupt institution to another of slightly higher perceived solvency.

[1] - for very small values of 'works'
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July 27, 2010, 01:05:53 PM
 #53


To be honest I think this thread is missing the real nature of bitcoins - I haven't read the entire thread (it's very long) so apologies if I'm repeating.  Think of back when the USD was gold-backed (pre-1970 or so), and gold was in (approximately) fixed supply.  On the back of that gold, many dollars, both real and credit, were issued.  The gold itself never lost value, but the dollar did.  Now, just as banks then couldn't make more gold, the bank you're suggesting couldn't make more bitcoins (except by hashing them out like everyone else).  They could issue lots of credit on the back of bitcoins in storage, but if that bank goes flop, the bitcoins will survive just fine, just like gold did back then.

Comments?
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July 29, 2010, 05:58:54 PM
 #54

What a perfect topic! Thanks everyone, especially the topicstarter.

In the meantime, how do you think, how long time it takes to literally print trillion dollars?
I guess, that cannot be done in several weeks, it takes longer, months perhaps?

I mean, that in a large volume economy, as is American economy, rapid printing of inflationary-significant
amounts of money will be limited by the physical properties of  paper money.
Um, Zimbabwe's economy is less tougher.

How do you think, how much space will take trillion dollars in 100$ papers?
I think it will be tens of thousands of cubic meters. Compare that to the volume of your house.
Paper money is so much a trouble. And electronic loans is so sexy,
that BitCoin too will not escape it's seductive shackles. What a sorrow!

I can't believe it all will just repeat over and over and over again...
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July 29, 2010, 07:34:34 PM
 #55

What a perfect topic! Thanks everyone, especially the topicstarter.

In the meantime, how do you think, how long time it takes to literally print trillion dollars?
I guess, that cannot be done in several weeks, it takes longer, months perhaps?

I mean, that in a large volume economy, as is American economy, rapid printing of inflationary-significant
amounts of money will be limited by the physical properties of  paper money.
Um, Zimbabwe's economy is less tougher.

How do you think, how much space will take trillion dollars in 100$ papers?
I think it will be tens of thousands of cubic meters. Compare that to the volume of your house.
Paper money is so much a trouble. And electronic loans is so sexy,
that BitCoin too will not escape it's seductive shackles. What a sorrow!

I can't believe it all will just repeat over and over and over again...

money is rarely printed relative to electronic growth, it's a number on a computer.

But even then this is irrelevant, the US government could simply print extremely large notes in the form of bearer instruments.

Bitcoins accepted to 18em7jEuKe1W74ChAZMFShUuqmwudWmpgu Smiley
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July 31, 2010, 01:54:02 PM
 #56


To be honest I think this thread is missing the real nature of bitcoins - I haven't read the entire thread (it's very long) so apologies if I'm repeating.  Think of back when the USD was gold-backed (pre-1970 or so), and gold was in (approximately) fixed supply.  On the back of that gold, many dollars, both real and credit, were issued.  The gold itself never lost value, but the dollar did.  Now, just as banks then couldn't make more gold, the bank you're suggesting couldn't make more bitcoins (except by hashing them out like everyone else).  They could issue lots of credit on the back of bitcoins in storage, but if that bank goes flop, the bitcoins will survive just fine, just like gold did back then.

Comments?

One of the things that should be apparent is that Bitcoins are backed by "luck".  Essentially it is an ongoing lottery system that allocates bitcoins at random (and generally small amounts compared to the total available) as an allocation system.  Some have said that bitcoins represent electricity or CPU cycles, but neither is very accurate.  Probabilistic random chance is much more accurate, but done in a controlled manner.

As far as I know, Bitcoins is the first monetary system backed by such a commodity.  How "the public" will react to that concept remains to be seen.

Fractional reserve banking can indeed happen with bitcoins, although it will be limited to deposits given to that banking institution.  Will that "inflate" the money supply?  Certainly, but it will be kept in check and there isn't a "central bank" to run off to if you run short.  There are perhaps other banks with which to get a "temporary" loan, but covering the deposits would certainly not be as easy it currently exists for those banks tied to a central (government derived authority) bank.  A bank run would most certainly be a very real possibility and happen much faster due to the electronic nature of the currency unit.  I don't know what a "network time" bank run would be like, but I think a really bad one could happen in minutes before it is over and the bank is insolvent even with no single depositor having more than a 1% stake in the bank.

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July 31, 2010, 01:57:42 PM
 #57


As far as I know, Bitcoins is the first monetary system backed by such a commodity.  How "the public" will react to that concept remains to be seen.


Whatever bitcoins is backed up with does not matter. Even gold is backed up by nothing. What matters is that 1) bitcoins are scarce and 2) People can't just dilly willy print whatever money they want.

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August 03, 2010, 04:21:22 AM
 #58

Not true. If I deposit 100 bitcoins at a bank, the bank lends out 90, and I want to withdraw my 100 bitcoins, the bank is screwed. Even if they lend out 25, the bank is screwed.

On demand deposits simply cannot be loaned out if a banking system is to ultimately remain stable. Sure, some banks can try to do it, but then they better not call them "on demand deposits". Deposits can be loaned out, but not with a guarantee of redemption. That is simply impossible as Bitcoins cannot be created out of thin air.

Not to pick on Bitcoiner, I've seen this line of reasoning in lots of threads. However, it is bunk as it leaves out obviously everyday solutions currently in use.

Obviously if there is "a run" on a bank's cash reserve, their obviously most common solution is to BORROW cash at interest from another bank. Sometimes this money comes from a central bank, but normally it comes from one of the other banks who are not experiencing "a run" on their cash.

A bank does not "go bankrupt" when it runs out of cash. It goes bankrupt when it runs out of credit worthiness. Banking is always based upon trust in the bankers making the decisions.

By the way, your bitcoin wallet is never "a bank" for any sense of the term "bank" that doesn't start with "piggy". It is more properly termed "a hoard". In the same sense that storing cash in a mattress, safe or piggybank would be a hoard.

A bank's deposits are always in the economic flow. That is the only way banks are able to pay interest. The interest comes because other people use the cash to create more commodity value, that in-turn translates back into cash to repay the loan with interest.

The last thing you want your bank to be doing is hoarding your cash. They couldn't pay you any interest, and would have to charge you a fee for safe storage of your money. It would be cheaper to put it in a mattress and buy a gun. So much for 100% reserve banks. They would be worth-less than fractional reserve banks to everyone.
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August 04, 2010, 05:07:19 PM
 #59

Obviously if there is "a run" on a bank's cash reserve, their obviously most common solution is to BORROW cash at interest from another bank. Sometimes this money comes from a central bank, but normally it comes from one of the other banks who are not experiencing "a run" on their cash.

A bank does not "go bankrupt" when it runs out of cash. It goes bankrupt when it runs out of credit worthiness. Banking is always based upon trust in the bankers making the decisions.

A bank that fails to meet deposits upon demand is said to be "in default", not "bankrupt".  A minor technical difference that to ordinary depositors doesn't really make any difference either.  There are also the additional problems of theft and embezzlement that can put obligations as higher than assets (money owed the bank through loans).  At that point the bank really is bankrupt and out of cash no matter how much comes in from the loans.  Borrowing money from another bank isn't going to help.

A huge problem with Bitcoins is that there is no "central bank" to run off to in terms of acquiring a quick loan between banks.  There may be some banks that are larger in terms of Bitcoins accounts and better run, but a central bank in the traditional sense like the Bank of England or the U.S. Federal Reserve simply can't exist for Bitcoins.  The very nature of Bitcoins precludes any potential bank of last resort, or somebody deliberately debasing the currency with a huge influx of new money created out of nothing.  Yes, Bitcoins does have a coin generation system, but that is very egalitarian in nature and random in terms of who will get that money.

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August 05, 2010, 12:34:21 AM
 #60

Not true. If I deposit 100 bitcoins at a bank, the bank lends out 90, and I want to withdraw my 100 bitcoins, the bank is screwed. Even if they lend out 25, the bank is screwed.

On demand deposits simply cannot be loaned out if a banking system is to ultimately remain stable. Sure, some banks can try to do it, but then they better not call them "on demand deposits". Deposits can be loaned out, but not with a guarantee of redemption. That is simply impossible as Bitcoins cannot be created out of thin air.

Not to pick on Bitcoiner, I've seen this line of reasoning in lots of threads. However, it is bunk as it leaves out obviously everyday solutions currently in use.

Obviously if there is "a run" on a bank's cash reserve, their obviously most common solution is to BORROW cash at interest from another bank. Sometimes this money comes from a central bank, but normally it comes from one of the other banks who are not experiencing "a run" on their cash.

A bank does not "go bankrupt" when it runs out of cash. It goes bankrupt when it runs out of credit worthiness. Banking is always based upon trust in the bankers making the decisions.


Given that I actually agree with you up to that point, how is my line of reasoning bunk? My point still stands. The supply if Bitcoins is limited: The banking system in aggregate cannot find enough Bitcoins if it loans its on demand deposits out! Why should the depositor accept quasi-bitcoins in the form of banking credit instead of the actual thing? On demand deposits simply cannot be loaned out if a banking system is to ultimately remain stable. Sure, some banks can try to do it, but then they better not call them "on demand deposits". Some might get away with it, but sooner or later, someone will find themselves between a rock and a hard place. Deposits can be loaned out, but not with a guarantee of redemption. That is simply impossible as Bitcoins cannot be created out of thin air.

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