Is there room for a State Run Cryptocurrency?

[Cranky4u]

Canada was setting up a state run crypto currency called MintChip - I think it went on hold due to pressure from the US Govt.

http://en.wikipedia.org/wiki/MintChip

[tee-rex]

Why not just adopt Bitcoin itself as a main currency? You could even set up a fractional banking system based on top Bitcoin. The first government to do this is going to have a huge economic advantage for the rest of this century.

You know, it's REALLY difficult to do FRB with Bitcoin, since you are REALLY relying on having more people funneling in Bitcoins. And guess what happens when some-one wants to withdraw? Either you start funneling Bitcoins out of other's accounts, and they're left with the IOUs. And what happens when they want to withdraw, etc. It's possible, but difficult.

That's why wallets were made, so people can be their own bank. And not have to go through the bureaucracy that comes with banks. And they can't be left with IOUs, ever. Either a Bitcoin is there or it's not.

If you can do FRB w gold you can do it w bitcoins.  The difference is if people have wallets then they dont need to keep their deposits in a bank.

But loans would still exist and credit money would still exist.   Banks dont really need deposit accounts these days to create loans.

For example if you lease a car,  the leasing bank creates credit without any deposit accounts

To do this (that is create credit without a deposit), banks need a governing body called a central bank which works behind them actually creating new money on behalf of a lending bank. Without a CB, banks could only issue their own "private" money. Now guess what happens if this money is Bitcoin (that is there is no central bank).

[giveBTCpls]

IMO cash is still safer than Bitcoin, cash cannot be traced by any means, Bitcoin could be traced with the correct knowledge. Probably a coin like Monero over i2p or so will be used as the next digital cash by the bad boys. Is this good or bad? I don't fucking know? as im a good guy.

[twiifm]

Why not just adopt Bitcoin itself as a main currency? You could even set up a fractional banking system based on top Bitcoin. The first government to do this is going to have a huge economic advantage for the rest of this century.

You know, it's REALLY difficult to do FRB with Bitcoin, since you are REALLY relying on having more people funneling in Bitcoins. And guess what happens when some-one wants to withdraw? Either you start funneling Bitcoins out of other's accounts, and they're left with the IOUs. And what happens when they want to withdraw, etc. It's possible, but difficult.

That's why wallets were made, so people can be their own bank. And not have to go through the bureaucracy that comes with banks. And they can't be left with IOUs, ever. Either a Bitcoin is there or it's not.

If you can do FRB w gold you can do it w bitcoins.  The difference is if people have wallets then they dont need to keep their deposits in a bank.

But loans would still exist and credit money would still exist.   Banks dont really need deposit accounts these days to create loans.

For example if you lease a car,  the leasing bank creates credit without any deposit accounts

To do this (that is create credit without a deposit), banks need a governing body called a central bank which works behind them actually creating new money on behalf of a lending bank. Without a CB, banks could only issue their own "private" money. Now guess what happens if this money is Bitcoin (that is there is no central bank).

I just showed example where credit is created w out Central Bank.  Most if not all car companies has financial services.   If they didn't youd have to go to commercial bank which then is connected to the Central Bank.  But surely BMWFS dont have deposit accounts.

[tee-rex]

Why not just adopt Bitcoin itself as a main currency? You could even set up a fractional banking system based on top Bitcoin. The first government to do this is going to have a huge economic advantage for the rest of this century.

You know, it's REALLY difficult to do FRB with Bitcoin, since you are REALLY relying on having more people funneling in Bitcoins. And guess what happens when some-one wants to withdraw? Either you start funneling Bitcoins out of other's accounts, and they're left with the IOUs. And what happens when they want to withdraw, etc. It's possible, but difficult.

That's why wallets were made, so people can be their own bank. And not have to go through the bureaucracy that comes with banks. And they can't be left with IOUs, ever. Either a Bitcoin is there or it's not.

If you can do FRB w gold you can do it w bitcoins.  The difference is if people have wallets then they dont need to keep their deposits in a bank.

But loans would still exist and credit money would still exist.   Banks dont really need deposit accounts these days to create loans.

For example if you lease a car,  the leasing bank creates credit without any deposit accounts

To do this (that is create credit without a deposit), banks need a governing body called a central bank which works behind them actually creating new money on behalf of a lending bank. Without a CB, banks could only issue their own "private" money. Now guess what happens if this money is Bitcoin (that is there is no central bank).

I just showed example where credit is created w out Central Bank.  Most if not all car companies has financial services.   If they didn't youd have to go to commercial bank which then is connected to the Central Bank.  But surely BMWFS dont have deposit accounts.

You can't create credit in national currency (emitted by a central bank under whatever name) without the central bank. I don't understand how car companies are related to all of this.

[twiifm]

Why not just adopt Bitcoin itself as a main currency? You could even set up a fractional banking system based on top Bitcoin. The first government to do this is going to have a huge economic advantage for the rest of this century.

You know, it's REALLY difficult to do FRB with Bitcoin, since you are REALLY relying on having more people funneling in Bitcoins. And guess what happens when some-one wants to withdraw? Either you start funneling Bitcoins out of other's accounts, and they're left with the IOUs. And what happens when they want to withdraw, etc. It's possible, but difficult.

That's why wallets were made, so people can be their own bank. And not have to go through the bureaucracy that comes with banks. And they can't be left with IOUs, ever. Either a Bitcoin is there or it's not.

If you can do FRB w gold you can do it w bitcoins.  The difference is if people have wallets then they dont need to keep their deposits in a bank.

But loans would still exist and credit money would still exist.   Banks dont really need deposit accounts these days to create loans.

For example if you lease a car,  the leasing bank creates credit without any deposit accounts

To do this (that is create credit without a deposit), banks need a governing body called a central bank which works behind them actually creating new money on behalf of a lending bank. Without a CB, banks could only issue their own "private" money. Now guess what happens if this money is Bitcoin (that is there is no central bank).

I just showed example where credit is created w out Central Bank.  Most if not all car companies has financial services.   If they didn't youd have to go to commercial bank which then is connected to the Central Bank.  But surely BMWFS dont have deposit accounts.

You can't create credit in national currency (emitted by a central bank under whatever name) without the central bank. I don't understand how car companies are related to all of this.

Because 50% of money exist as credit in shadow banking.  Too lazy to post a chart.   But its on the Fed Reserve website.   Someone said its difficult to do FRB w bitcoin bc reserves.   I said it isn't.  The point about car companies is to illustrate a bank that creates credit w/o deposit accounts or reserves.  They create credit using assets (cars)

My view of money comes from Modern Monetary Theory so if a little hard to understand if you don't know the theory.  You are correct that base money comes from Central Bank.  BTW,  I think Central Banks are necessary but also their policies are ineffective  in crisis

My point is that bitcoiners mistake bitcoin as a solution when its not.   Bitcoin is based on a 20th century understanding of banking not modern banking

[Ivan Bitcoinowsky]

So the question came up - If Scotland needs a new currency, why not set up a State-Run Cryptocurrency?

And so my question came up- ok, but what for? No, seriously, why? You want to save up on paper and ink or what?

Compare old fashioned paper-newspaper and issue sent to you to read on tablet. You get it?

[williamj2543]

IMO cash is still safer than Bitcoin, cash cannot be traced by any means, Bitcoin could be traced with the correct knowledge. Probably a coin like Monero over i2p or so will be used as the next digital cash by the bad boys. Is this good or bad? I don't fucking know? as im a good guy.

You can lose cash by simply dropping it, but yes I agree with you in the sense that once you receive the cash, you don't know where it came from, as nothing is left on the bill to prove that. With bitcoin, you can trace the money all the way back to the block that it was created in. The problem with this is that you can see the balance of anyone, which I think is why people will hide their balances from their friends for privacy.

[tee-rex]

Why not just adopt Bitcoin itself as a main currency? You could even set up a fractional banking system based on top Bitcoin. The first government to do this is going to have a huge economic advantage for the rest of this century.

You know, it's REALLY difficult to do FRB with Bitcoin, since you are REALLY relying on having more people funneling in Bitcoins. And guess what happens when some-one wants to withdraw? Either you start funneling Bitcoins out of other's accounts, and they're left with the IOUs. And what happens when they want to withdraw, etc. It's possible, but difficult.

That's why wallets were made, so people can be their own bank. And not have to go through the bureaucracy that comes with banks. And they can't be left with IOUs, ever. Either a Bitcoin is there or it's not.

If you can do FRB w gold you can do it w bitcoins.  The difference is if people have wallets then they dont need to keep their deposits in a bank.

But loans would still exist and credit money would still exist.   Banks dont really need deposit accounts these days to create loans.

For example if you lease a car,  the leasing bank creates credit without any deposit accounts

To do this (that is create credit without a deposit), banks need a governing body called a central bank which works behind them actually creating new money on behalf of a lending bank. Without a CB, banks could only issue their own "private" money. Now guess what happens if this money is Bitcoin (that is there is no central bank).

I just showed example where credit is created w out Central Bank.  Most if not all car companies has financial services.   If they didn't youd have to go to commercial bank which then is connected to the Central Bank.  But surely BMWFS dont have deposit accounts.

You can't create credit in national currency (emitted by a central bank under whatever name) without the central bank. I don't understand how car companies are related to all of this.

Because 50% of money exist as credit in shadow banking.  Too lazy to post a chart.   But its on the Fed Reserve website.   Someone said its difficult to do FRB w bitcoin bc reserves.   I said it isn't.  The point about car companies is to illustrate a bank that creates credit w/o deposit accounts or reserves.  They create credit using assets (cars)

My view of money comes from Modern Monetary Theory so if a little hard to understand if you don't know the theory.  You are correct that base money comes from Central Bank.  BTW,  I think Central Banks are necessary but also their policies are ineffective  in crisis

My point is that bitcoiners mistake bitcoin as a solution when its not.   Bitcoin is based on a 20th century understanding of banking not modern banking

There is no such economic theory as "Modern Monetary Theory". What goes under this name, are just a few assertions, one of them being that the banks can create credit without having deposits prior to. But this has long been known before and refers primarily to accounting rules in banks. To make things simple, just think that the deposits are already there in the Central Bank (since it can emit any required amount of money). And don't point to Federal Reserve, if you talk about creating money without a central bank, since Fed IS a central bank.

And I still don't understand your analogy with cars. Care to expand more on this more?

[TheChosenOne]

No. Just... no.

[twiifm]

Why not just adopt Bitcoin itself as a main currency? You could even set up a fractional banking system based on top Bitcoin. The first government to do this is going to have a huge economic advantage for the rest of this century.

You know, it's REALLY difficult to do FRB with Bitcoin, since you are REALLY relying on having more people funneling in Bitcoins. And guess what happens when some-one wants to withdraw? Either you start funneling Bitcoins out of other's accounts, and they're left with the IOUs. And what happens when they want to withdraw, etc. It's possible, but difficult.

That's why wallets were made, so people can be their own bank. And not have to go through the bureaucracy that comes with banks. And they can't be left with IOUs, ever. Either a Bitcoin is there or it's not.

If you can do FRB w gold you can do it w bitcoins.  The difference is if people have wallets then they dont need to keep their deposits in a bank.

But loans would still exist and credit money would still exist.   Banks dont really need deposit accounts these days to create loans.

For example if you lease a car,  the leasing bank creates credit without any deposit accounts

To do this (that is create credit without a deposit), banks need a governing body called a central bank which works behind them actually creating new money on behalf of a lending bank. Without a CB, banks could only issue their own "private" money. Now guess what happens if this money is Bitcoin (that is there is no central bank).

I just showed example where credit is created w out Central Bank.  Most if not all car companies has financial services.   If they didn't youd have to go to commercial bank which then is connected to the Central Bank.  But surely BMWFS dont have deposit accounts.

You can't create credit in national currency (emitted by a central bank under whatever name) without the central bank. I don't understand how car companies are related to all of this.

Because 50% of money exist as credit in shadow banking.  Too lazy to post a chart.   But its on the Fed Reserve website.   Someone said its difficult to do FRB w bitcoin bc reserves.   I said it isn't.  The point about car companies is to illustrate a bank that creates credit w/o deposit accounts or reserves.  They create credit using assets (cars)

My view of money comes from Modern Monetary Theory so if a little hard to understand if you don't know the theory.  You are correct that base money comes from Central Bank.  BTW,  I think Central Banks are necessary but also their policies are ineffective  in crisis

My point is that bitcoiners mistake bitcoin as a solution when its not.   Bitcoin is based on a 20th century understanding of banking not modern banking

There is no such economic theory as "Modern Monetary Theory". What goes under this name, are just a few assertions, one of them being that the banks can create credit without having deposits prior to. But this has long been known before and refers primarily to accounting rules in banks. To make things simple, just think that the deposits are already there in the Central Bank (since it can emit any required amount of money). And don't point to Federal Reserve, if you talk about creating money without a central bank, since Fed IS a central bank.

And I still don't understand your analogy with cars. Care to expand more on this more?

No what im trying to get you to do is expand what you think is money.   To understand the financialized economy you have to grasp credit money and shadow banking

Read this about shadow banks:

http://www.stlouisfed.org/publications/re/articles/?id=2165
http://www.newyorkfed.org/research/staff_reports/sr458.html

Car finance is just an example of where a bank can create credit w/o deposits.   I just picked that because people are familiar with it.   You go to BMW to lease a car.   BMWFS creates a loan to itself out of thin air.   BMW buys the car then rents the car to you.   Then They pack these leases together as an asset backed security and these papers are used as money.   No deposits required

Any securitized instrument can also be used as money.   Residential Mortgage Backed Securities are an example.   Theres other things like repos,  money market mutual funds,  asset backed commercial paper,  etc..

[DeathAndTaxes]

The blockchain is expensive.  It is expensive to store, expensive to process, and expensive to secure.   That cost is the cost of decentralization.   It is the cost of a payment system with no trusted authority.  The 100x the annual bitcoin transaction volume could be processed by a single server with central authority.  There is absolutely no point to a centralized, decentralized currency.   You take all of the cost of decentralization and pile it on top of all the problems of a centralized currency. 

[tee-rex]

There is no such economic theory as "Modern Monetary Theory". What goes under this name, are just a few assertions, one of them being that the banks can create credit without having deposits prior to. But this has long been known before and refers primarily to accounting rules in banks. To make things simple, just think that the deposits are already there in the Central Bank (since it can emit any required amount of money). And don't point to Federal Reserve, if you talk about creating money without a central bank, since Fed IS a central bank.

And I still don't understand your analogy with cars. Care to expand more on this more?

No what im trying to get you to do is expand what you think is money.   To understand the financialized economy you have to grasp credit money and shadow banking

Read this about shadow banks:

http://www.stlouisfed.org/publications/re/articles/?id=2165
http://www.newyorkfed.org/research/staff_reports/sr458.html

If you can't explain a theory with your own words, it shows with certainty that you don't understand it yourself (no offense intended).

[tee-rex]

Car finance is just an example of where a bank can create credit w/o deposits.   I just picked that because people are familiar with it.   You go to BMW to lease a car.   BMWFS creates a loan to itself out of thin air.   BMW buys the car then rents the car to you.   Then They pack these leases together as an asset backed security and these papers are used as money.   No deposits required

Why should BMW buy you a car if they can produce it for you? In this example BMW serves as a central bank. I still don't understand the essence of your example.

[twiifm]

Car finance is just an example of where a bank can create credit w/o deposits.   I just picked that because people are familiar with it.   You go to BMW to lease a car.   BMWFS creates a loan to itself out of thin air.   BMW buys the car then rents the car to you.   Then They pack these leases together as an asset backed security and these papers are used as money.   No deposits required

Why should BMW buy you a car if they can produce it for you? In this example BMW serves as a central bank. I still don't understand the essence of your example.

They produce the cars but they are using it as asset to create credit.   Dont ask me why they do.   Its what they do.   They do this because not many people have 60K cash to buy their cars

The credit is the money.   In modern economies half the money is credit.  Why is this so hard to understand?  Not just cars but all over the finance sector

[tee-rex]

Car finance is just an example of where a bank can create credit w/o deposits.   I just picked that because people are familiar with it.   You go to BMW to lease a car.   BMWFS creates a loan to itself out of thin air.   BMW buys the car then rents the car to you.   Then They pack these leases together as an asset backed security and these papers are used as money.   No deposits required

Why should BMW buy you a car if they can produce it for you? In this example BMW serves as a central bank. I still don't understand the essence of your example.

They produce the cars but they are using it as asset to create credit.   Dont ask me why they do.   Its what they do.   They do this because not many people have 60K cash to buy their cars

The credit is the money.   In modern economies half the money is credit.  Why is this so hard to understand?  Not just cars but all over the finance sector

I don't in the least deny this. But you seem to be missing my point. There are only two ways a bank can create money out of the thin air. In the first case if it works as a central bank proxy (as it happens when people say that banks create money out of nothing), or it is a central bank itself. It becomes pretty evident if you take an example with no central bank. Could banks create bitcoins out of thin air? No, they could only issue "paper" bitcoins.

Also, there is nothing modern or new in this "Modern Monetary Theory".

[twiifm]

Car finance is just an example of where a bank can create credit w/o deposits.   I just picked that because people are familiar with it.   You go to BMW to lease a car.   BMWFS creates a loan to itself out of thin air.   BMW buys the car then rents the car to you.   Then They pack these leases together as an asset backed security and these papers are used as money.   No deposits required

Why should BMW buy you a car if they can produce it for you? In this example BMW serves as a central bank. I still don't understand the essence of your example.

They produce the cars but they are using it as asset to create credit.   Dont ask me why they do.   Its what they do.   They do this because not many people have 60K cash to buy their cars

The credit is the money.   In modern economies half the money is credit.  Why is this so hard to understand?  Not just cars but all over the finance sector

I don't in the least deny this. But you seem to be missing my point. There are only two ways a bank can create money out of the thin air. In the first case if it works as a central bank proxy (as it happens when people say that banks create money out of nothing), or it is a central bank itself. It becomes pretty evident if you take an example with no central bank. Could banks create bitcoins out of thin air? No, they could only issue "paper" bitcoins.

Also, there is nothing modern or new in this "Modern Monetary Theory".

Who said anything about new?  I said my view of money comes from MMT.  As opposed to neoclassical, Austrian, or other.

I'm not missing your point.  You just have a neoclassical view of money and you are glossing over the shadow bank industry.  You are arguing the view of neoclassicism and I'm arguing the view of MMT

Ok imagine if we revert back to a gold standard system.  Banks could still make loans using FRB but they are required to have some reserves as deposits due to regulations.  But instead of going back in time let's say we just replace the modern system w gold standard.  BMWFS can still keep financing loans using their cars as assets.  When you finance a car from BMW they create a loan.  When that car is paid off the loan is taken off their balance sheet the interest payments remain in the supply as an monetary expansion.  They can also create asset backed securities on these and use these as liquid money.  You see how this has nothing to do w Central Banks or commercial / deposit banks?

If you look at the events leading up to 2008 GFC.  This was what was happening.   People like Yellen is aware of this.  The issue is how to regulate this shadow bank money.  Nobody knows how to deal with it

[counter]

Well it seems many people are against the idea.  I think it would be good in some ways because there would be the benefit of transparency in some ways.  I'd say if something like this was to happen the system would have to be more transparent then even Bitcoin for it to work.  Being able to follow funds would cut down on corruption I'd like to believe.  I'm sure in some ways it is just wishful thinking on my part but at the same time I firmly believe it is many times better then the system we have now.

I'm sure there would be new problems that haven't been thought of yet but lack of transparency with the current model outways the negatives of a cryptographic system IMO.

[tee-rex]

Car finance is just an example of where a bank can create credit w/o deposits.   I just picked that because people are familiar with it.   You go to BMW to lease a car.   BMWFS creates a loan to itself out of thin air.   BMW buys the car then rents the car to you.   Then They pack these leases together as an asset backed security and these papers are used as money.   No deposits required

Why should BMW buy you a car if they can produce it for you? In this example BMW serves as a central bank. I still don't understand the essence of your example.

They produce the cars but they are using it as asset to create credit.   Dont ask me why they do.   Its what they do.   They do this because not many people have 60K cash to buy their cars

The credit is the money.   In modern economies half the money is credit.  Why is this so hard to understand?  Not just cars but all over the finance sector

I don't in the least deny this. But you seem to be missing my point. There are only two ways a bank can create money out of the thin air. In the first case if it works as a central bank proxy (as it happens when people say that banks create money out of nothing), or it is a central bank itself. It becomes pretty evident if you take an example with no central bank. Could banks create bitcoins out of thin air? No, they could only issue "paper" bitcoins.

Also, there is nothing modern or new in this "Modern Monetary Theory".

Who said anything about new?  I said my view of money comes from MMT.  As opposed to neoclassical, Austrian, or other.

I'm not missing your point.  You just have a neoclassical view of money and you are glossing over the shadow bank industry.  You are arguing the view of neoclassicism and I'm arguing the view of MMT

Ok imagine if we revert back to a gold standard system.  Banks could still make loans using FRB but they are required to have some reserves as deposits due to regulations.  But instead of going back in time let's say we just replace the modern system w gold standard.  BMWFS can still keep financing loans using their cars as assets.  When you finance a car from BMW they create a loan.  When that car is paid off the loan is taken off their balance sheet the interest payments remain in the supply as an monetary expansion.  They can also create asset backed securities on these and use these as liquid money.  You see how this has nothing to do w Central Banks or commercial / deposit banks?

If you look at the events leading up to 2008 GFC.  This was what was happening.   People like Yellen is aware of this.  The issue is how to regulate this shadow bank money.  Nobody knows how to deal with it

As I said before, I don't understand your example of BMW lending cars, so let's keep it simple and proceed now from bitcoins (apart from gold). FRB is irrelevant here, and to make things even simpler, let's assume there are no reserve requirements at all (a good assumption since there is no Central Bank to begin with). Could the banks then create bitcoins out of the thin air just like they are said to do with fiat?

[twiifm]

Car finance is just an example of where a bank can create credit w/o deposits.   I just picked that because people are familiar with it.   You go to BMW to lease a car.   BMWFS creates a loan to itself out of thin air.   BMW buys the car then rents the car to you.   Then They pack these leases together as an asset backed security and these papers are used as money.   No deposits required

Why should BMW buy you a car if they can produce it for you? In this example BMW serves as a central bank. I still don't understand the essence of your example.

They produce the cars but they are using it as asset to create credit.   Dont ask me why they do.   Its what they do.   They do this because not many people have 60K cash to buy their cars

The credit is the money.   In modern economies half the money is credit.  Why is this so hard to understand?  Not just cars but all over the finance sector

I don't in the least deny this. But you seem to be missing my point. There are only two ways a bank can create money out of the thin air. In the first case if it works as a central bank proxy (as it happens when people say that banks create money out of nothing), or it is a central bank itself. It becomes pretty evident if you take an example with no central bank. Could banks create bitcoins out of thin air? No, they could only issue "paper" bitcoins.

Also, there is nothing modern or new in this "Modern Monetary Theory".

Who said anything about new?  I said my view of money comes from MMT.  As opposed to neoclassical, Austrian, or other.

I'm not missing your point.  You just have a neoclassical view of money and you are glossing over the shadow bank industry.  You are arguing the view of neoclassicism and I'm arguing the view of MMT

Ok imagine if we revert back to a gold standard system.  Banks could still make loans using FRB but they are required to have some reserves as deposits due to regulations.  But instead of going back in time let's say we just replace the modern system w gold standard.  BMWFS can still keep financing loans using their cars as assets.  When you finance a car from BMW they create a loan.  When that car is paid off the loan is taken off their balance sheet the interest payments remain in the supply as an monetary expansion.  They can also create asset backed securities on these and use these as liquid money.  You see how this has nothing to do w Central Banks or commercial / deposit banks?

If you look at the events leading up to 2008 GFC.  This was what was happening.   People like Yellen is aware of this.  The issue is how to regulate this shadow bank money.  Nobody knows how to deal with it

As I said before, I don't understand your example of BMW lending cars, so let's keep it simple and proceed now from bitcoins (apart from gold). FRB is irrelevant here, and to make things even simpler, let's assume there are no reserve requirements at all (a good assumption since there is no Central Bank to begin with). Could the banks then create bitcoins out of the thin air just like they are said to do with fiat?

No they can't create bit coins.  But they can still create credit money