Paul Grignon Just made Bitcoin killer

[User705]

To ask the question again - what stops defaults from happening in this wonderful world?   

If the answer is "trust" them I'm out. 

The same thing that keeps every market honest. Feedback. Only producers with verifiable credit history will be allowed to issue credit. If the power company wants to issue me credits in exchange for my boat parts I think they are good for it, if they are not I will leave negative feedback.

What's defined as verifiable credit history?  Allowed by whom?

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[Zangelbert Bingledack]

Cool, a guy who doesn't understand money or economics is making a Bitcoin-killer. Good luck with that.

[Hawker]

Can you summarise?  I am not very patient with long YouTube videos and gave up.

The only point I got was something about self issued debt. Not sure why anyone would agree to sell me a car on this basis.

The average adult reads prose text at 250 to 300 words per minute (of course, we are all above average here). The recommended speed for books on tape is 150 to 160 words per minute.  So its a useful rule of thumb that if there is no transcript, the video isn't worth watching

[Xav]

I love it he is creating digital CURRENCY with a definable unit and an elastic supply.

Interesting. Now I wonder what's the value of 1 BTC according this RICI-system, considering today's 12 million BTCs?

[HairyMaclairy]

To ask the question again - what stops defaults from happening in this wonderful world?   

If the answer is "trust" them I'm out. 

The same thing that keeps every market honest. Feedback. Only producers with verifiable credit history will be allowed to issue credit. If the power company wants to issue me credits in exchange for my boat parts I think they are good for it, if they are not I will leave negative feedback.

In the real world I will insist that you pay in advance, give me a bank guarantee, irrevocable letter of credit or put funds into my lawyer's escrow account before I do business with you.  Feedback is overrated.

[cbeast]

congratulations! you invented the credit card.   

[johnyj]

seems like the same fundamental misunderstanding as the venus project people have. business to business barter could never take the place of money because it is necessary to have a heterogeneous unit of account inorder to have prices. Prices are necissary inorder to calculate profit and loss and inorder to account for opportunity costs. Calculating profit loss and opportunity costs is necessary in order to rationally allocate scarce resources and to communicate, in a useful way, the decentralized knowledge of individual market actors. Self issued credit is great, but it must be priced, and inorder to do this you need a widely understood unit of account.

so imagine trying to know how many shoes an elevator is worth, and how many elevators a mongoose is worth, and how many mongeese a cheeseburger is worth, with out using "money" as an intermediary step.

Value is all relative, but use money to count value will generate some stickiness. I guess just like mining, eventually everything's price will be decided by the electricity and time used

[johnyj]

Grignon's understanding is not very accurate: Commercial banks can not create credit money without enough base money at hand

[Anon136]

Grignon's understanding is not very accurate: Commercial banks can not create credit money without enough base money at hand

All they have to do is satisfy reserve ratio requirements. Usually that's about 10 to 1.

[Anon136]

seems like the same fundamental misunderstanding as the venus project people have. business to business barter could never take the place of money because it is necessary to have a heterogeneous unit of account inorder to have prices. Prices are necissary inorder to calculate profit and loss and inorder to account for opportunity costs. Calculating profit loss and opportunity costs is necessary in order to rationally allocate scarce resources and to communicate, in a useful way, the decentralized knowledge of individual market actors. Self issued credit is great, but it must be priced, and inorder to do this you need a widely understood unit of account.

so imagine trying to know how many shoes an elevator is worth, and how many elevators a mongoose is worth, and how many mongeese a cheeseburger is worth, with out using "money" as an intermediary step.

Value is all relative, but use money to count value will generate some stickiness. I guess just like mining, eventually everything's price will be decided by the electricity and time used

Sickness doesn't have to be generated, it is the natural state of the universe, some choices can mitigate it, but none can ever eliminate it.

Value to an individual is relative sure, of course. But by pricing those relative valuations with a common unit of account it becomes possible to gain an understanding of what sorts of trade offs in the deployment of scarce resources maximize utility for those individuals as per their own relative valuations.

[johnyj]

Grignon's understanding is not very accurate: Commercial banks can not create credit money without enough base money at hand

All they have to do is satisfy reserve ratio requirements. Usually that's about 10 to 1.

And most of the time they barely satisfy this requirement. When a crisis hit, they can't create credit money to buy themselves out of trouble, since most of their money is checkbook money which can not be used to create checkbook money

[Anon136]

Grignon's understanding is not very accurate: Commercial banks can not create credit money without enough base money at hand

All they have to do is satisfy reserve ratio requirements. Usually that's about 10 to 1.

And most of the time they barely satisfy this requirement. When a crisis hit, they can't create credit money to buy themselves out of trouble, since most of their money is checkbook money which can not be used to create checkbook money

they cant use their own checkbook money but the checkbook money they hold on deposit for others is considered as reserve.

[sublime5447]

Grignon's understanding is not very accurate: Commercial banks can not create credit money without enough base money at hand

All they have to do is satisfy reserve ratio requirements. Usually that's about 10 to 1.

And most of the time they barely satisfy this requirement. When a crisis hit, they can't create credit money to buy themselves out of trouble, since most of their money is checkbook money which can not be used to create checkbook money

Grignon gets it right, go read debunking economics by Steve Keen.. When you go to the bank and take out a loan the money is never there you are not borrowing other peoples savings. The money springs into existence out of thin air when you sign your name to the paper for the loan. If all debts public and private where to be paid off currency would no longer exist. Look at keens debt based modeling and learn about hyman minsky

To the haters we will see. I am not saying Pauls coin but it or something like it will make bitcoin irrelevant for transactions of anything other than black market goods or payment for lap dances. 

[Ibian]

Oh Satoshi please stop with the haters thing already. It's a stupid and very obvious way to try to discredit those who disagree with you, nevermind WHY they disagree. The dudes proposal doesn't make much sense to those in this thread so far, explain it better than he did or stfu.

[sublime5447]

Oh Satoshi please stop with the haters thing already. It's a stupid and very obvious way to try to discredit those who disagree with you, nevermind WHY they disagree. The dudes proposal doesn't make much sense to those in this thread so far, explain it better than he did or stfu.

It makes perfect sense.. It makes sense to me, I bet it makes sense to peter schiff, paul krugmon, alan greenspan, gary north, and the hundred others who have pointed out why bitcoin will never be a nations currency and isnt useful to replace government issued fiat or as the basis of an economy.

Pauls concept has the power to change the world bitcoin doesnt.
 

[kaito]

Pauls concept has the power to change the world bitcoin doesnt.

Except that bitcoin has already changed the world.

[Impaler]

Ok the flaws I see are myriad

The 'producers' who issue credit are doing two things issuing credit AND setting a completely arbitrary 'price' for their goods.  Nothing really links the value of their goods with how much credit 'units' they declare their goods to be worth.

If the producers ever needs to raise prices (due to a legitimate change in their cost structure) then how are old credit vouchers treated.  If their nominal 'value' in 'permanent coin units' is their real value then the people holding these vouchers have lost purchasing power. 

If on the other hand these credits are really going to be worth '1 loaf of bread' for ever and always then their nominal units are meaningless and they will function as commodity futures and their will not be Fungible.

Given the fact that some issuers will shutdown with outstanding credits this will make holding them risky and hence less liquid then real money.

Now I don't particularly see anything wrong with the idea of a whole bunch of cryptographic futures contracts and a system of buisness-2-buisness bartering but it will not become 'money' even to the degree that BTC has.

[johnyj]

Grignon's understanding is not very accurate: Commercial banks can not create credit money without enough base money at hand

All they have to do is satisfy reserve ratio requirements. Usually that's about 10 to 1.

And most of the time they barely satisfy this requirement. When a crisis hit, they can't create credit money to buy themselves out of trouble, since most of their money is checkbook money which can not be used to create checkbook money

they cant use their own checkbook money but the checkbook money they hold on deposit for others is considered as reserve.

Grignon is right about the interest part (ever expanding debt in order to pay back the interest), but the FRB part is not very clear. The reserve is always base money, which can be circulated and lent. The amount of base money limited the total checkbook money they can create

By the way, if the interest rate are close to zero and there is certain level of inflation, then over time the debt can be reduced slowly due to lower and lower real debt, that is a way for today's system to cope with the shrinking period of economy, like Japan did during past 2 decades

An extremely low interest rate and excessive money supply will be the norm for the next few years, good for bitcoin

[Anon136]

Grignon's understanding is not very accurate: Commercial banks can not create credit money without enough base money at hand

All they have to do is satisfy reserve ratio requirements. Usually that's about 10 to 1.

And most of the time they barely satisfy this requirement. When a crisis hit, they can't create credit money to buy themselves out of trouble, since most of their money is checkbook money which can not be used to create checkbook money

they cant use their own checkbook money but the checkbook money they hold on deposit for others is considered as reserve.

Grignon is right about the interest part (ever expanding debt in order to pay back the interest), but the FRB part is not very clear. The reserve is always base money, which can be circulated and lent. The amount of base money limited the total checkbook money they can create

By the way, if the interest rate are close to zero and there is certain level of inflation, then over time the debt can be reduced slowly due to lower and lower real debt, that is a way for today's system to cope with the shrinking period of economy, like Japan did during past 2 decades

An extremely low interest rate and excessive money supply will be the norm for the next few years, good for bitcoin

The first paragraph is exactly right. But if you think through the logic, you can never have a decrease in total debt, in nominal terms, with a posative or 0 interest rate, without introducing the variable of open market operations. For the debt to decrease in nominal terms you would need a negative interest rate again, assuming we do not include the variable of open market operations. I assume what you mean is that the growth in productivity can in theory outpace the increase in debt with very low interest rates? Do I have that right?

[Xav]

I love it he is creating digital CURRENCY with a definable unit and an elastic supply.

Interesting. Now I wonder what's the value of 1 BTC according this RICI-system, considering today's 12 million BTCs?

Still waiting for an answer ....