Economics; how banks poof money into existance, how can crypto solve this?

[anthonytcm]

Sorry for the confusing title. To kick it off I'll start with the frase at the beginning of a video I'll link below: "Never before has there been as much money as there is today, yet central banks continue to pump money into the economy...", I saw this video recently which goes into detail how banks are just poofing money out of nowhere with little to no repercussions, here: https://www.youtube.com/watch?v=t6m49vNjEGs

So I wanted to discuss, realistically, how can crypto solve this? If you didn't want to watch the video there's this very simple analogy of how the majority of people think banks work:

Investor deposits large amounts of money, entrepeneurs come and ask for a loan which is taken from these investors pools, right? Well, not quite. Private banks in some jurisdictions are allowed to loan upwards 99% money they themselves don't have, and still be picky about it (they're not going to invest in risky projects, loans are given of course to safer projects, short term profit if you will).

So there you have it, I know of course that the blockchain is transparent, everyone can see where the money goes, can transactions being out in the open help deal with these shady practices?

Which takes us to my next point, as proven last year, crypto currencies don't seem to handle well with a large influx of transaction, so would the answer for crypto to be an actual currency be as simple as "be able to do more transactions"? And I don't mean exactly double them, how many financial transactions happen per second? They're quite a lot. Can it really be hosted in the blockchain?

[bluefirecorp_]

The government doesn't make money out of nowhere. Instead, if lends it from a non-governmental organization known as The Federal Reserve, at least in the United States.

https://en.wikipedia.org/wiki/Federal_Reserve_System

The federal reserve does make money out of nowhere though... so there's that aspect.

For the US government to lend money from the federal reserve, legislation is required. Ideally, legislation is drafted by individuals who represent the people. Society (which is you and me) are supposed to hold these representatives accountable (by not electing them).

The public ledger system does have some scaling issues, but overall, it's still a public ledger, which is nice.

There's some private ledger cryptocurrencies, and some other centralized cryptocurrencies which allow crypto to scale better. However, these systems have their own pitfalls.

[joerogers8]

The government doesn't make money out of nowhere. Instead, if lends it from a non-governmental organization known as The Federal Reserve, at least in the United States.

https://en.wikipedia.org/wiki/Federal_Reserve_System

The federal reserve does make money out of nowhere though... so there's that aspect.

For the US government to lend money from the federal reserve, legislation is required. Ideally, legislation is drafted by individuals who represent the people. Society (which is you and me) are supposed to hold these representatives accountable (by not electing them).

The public ledger system does have some scaling issues, but overall, it's still a public ledger, which is nice.

There's some private ledger cryptocurrencies, and some other centralized cryptocurrencies which allow crypto to scale better. However, these systems have their own pitfalls.

I'm pretty sure the us government borrows the money from the federal reserve at 6% interest.   Then the people get to pay back the original amount + the interest.  

This in turn makes you wonder how the central bankers got one over on the US, why the government would allow this to take place and not simply just print the dollars themselves and let the citizens keep the 6%.  Also makes you wonder who is really in charge. 

[anthonytcm]

The government doesn't make money out of nowhere. Instead, if lends it from a non-governmental organization known as The Federal Reserve, at least in the United States.

https://en.wikipedia.org/wiki/Federal_Reserve_System

The federal reserve does make money out of nowhere though... so there's that aspect.

For the US government to lend money from the federal reserve, legislation is required. Ideally, legislation is drafted by individuals who represent the people. Society (which is you and me) are supposed to hold these representatives accountable (by not electing them).

The public ledger system does have some scaling issues, but overall, it's still a public ledger, which is nice.

There's some private ledger cryptocurrencies, and some other centralized cryptocurrencies which allow crypto to scale better. However, these systems have their own pitfalls.

And that's the thing, as you describe it is also the perfect way for it to happen, federal reserve makes physical money. If you watch the documentary it focuses more on Europe and also on the digital side of things. I think that the ability for private banks to make loans with money they don't have should NOT happen.

[bluefirecorp_]

The government doesn't make money out of nowhere. Instead, if lends it from a non-governmental organization known as The Federal Reserve, at least in the United States.

https://en.wikipedia.org/wiki/Federal_Reserve_System

The federal reserve does make money out of nowhere though... so there's that aspect.

For the US government to lend money from the federal reserve, legislation is required. Ideally, legislation is drafted by individuals who represent the people. Society (which is you and me) are supposed to hold these representatives accountable (by not electing them).

The public ledger system does have some scaling issues, but overall, it's still a public ledger, which is nice.

There's some private ledger cryptocurrencies, and some other centralized cryptocurrencies which allow crypto to scale better. However, these systems have their own pitfalls.

I'm pretty sure the us government borrows the money from the federal reserve at 6% interest.   Then the people get to pay back the original amount + the interest.  

Right. That's to prevent the government from just having the federal reserve printing infinite money.

Ideally, we'd be paying down our debt to the federal reserve, but with the deficit at an all time high due to tax cuts, that's not going to happen.

Certain public entities generate a lot more tax revenue than what they consume, e.g. NASA, IRS. Other entities consume much more money than what they make, e.g. US military's presence in the middle east.

The government doesn't make money out of nowhere. Instead, if lends it from a non-governmental organization known as The Federal Reserve, at least in the United States.

https://en.wikipedia.org/wiki/Federal_Reserve_System

The federal reserve does make money out of nowhere though... so there's that aspect.

For the US government to lend money from the federal reserve, legislation is required. Ideally, legislation is drafted by individuals who represent the people. Society (which is you and me) are supposed to hold these representatives accountable (by not electing them).

The public ledger system does have some scaling issues, but overall, it's still a public ledger, which is nice.

There's some private ledger cryptocurrencies, and some other centralized cryptocurrencies which allow crypto to scale better. However, these systems have their own pitfalls.

And that's the thing, as you describe it is also the perfect way for it to happen, federal reserve makes physical money. If you watch the documentary it focuses more on Europe and also on the digital side of things. I think that the ability for private banks to make loans with money they don't have should NOT happen.

How do you issue your first tokens? How do you distribute them? Do they just rely on random distribution for proof of work from a decentralized network? That's just silliness.

[anthonytcm]

How do you issue your first tokens? How do you distribute them? Do they just rely on random distribution for proof of work from a decentralized network? That's just silliness.

You're missing the point, a private entity should not be allowed free reign to print money. You said it yourself, that's what the federal reserve is there for. Otherwise there's exponential profits that end up being pocketed by these private institutions, and at large scale, could cause a crash in the economy.