Why There Should Be A Bitcoin Central Bank

[hdbuck]

lmao..  naughty naughty forbes..

[jbreher]

This is exactly correct.

No, this is incorrect. Most of the money that banks loan out (i.e. That above the reserve ratio - the vast bulk of it) is new money created by the very act of making the loan.

This is why banks need to keep a certain percentage of their money either on deposit at the federal reserve or in their cash vaults, so when depositors want to withdraw their money to another bank or want to withdraw cash fiat they are able to do so.

While true, it does little to illuminate the wealth-stealing scam by which most money comes into existence. The germane part that you seems to be glossing over is the 'certain percentage' part. First, this is a vanishingly small percentage. Historically, 10% was a number often used. I don't know what the current reserve ratio is. However, the 10% is misleading. When the bank loans out the $90 of a $100 deposit, what form is it in? Cash? No. It is in the form of a check. This check will most assuredly be deposited upon another account, adding to that bank's reserves. This bank then loans out $81 of the incoming $90, which is deposited in another bank, who then loans out $72, deposited in...

The ugliness is that this creates a situation in which a bank is overleveraged as a matter of course. If a significant number of depositors show up asking for their money, the bank cannot accommodate them. Indeed this is why the FED exists. If there is a run on the bank, the FED steps in and socializes the losses by printing yet more new money. At the very real cost of stealing more wealth -- in the form of purchasing power -- from each and every person holding dollars before the bailout.

[johncarpe64]

I think you take the "create money out of thin air" expression too literally. They get money from depositors and they loan it out. That's how money appears to be created since both the depositor and the borrower act as if they have the money.

That is because they _do_ both have the money. New money is absolutely created by the act of making the loan. I do not take the expression too literally. You are mistaken. Please read what is occurring before you make further incorrect assertions.

My mistake is considering the monetary base to be money and the rest to be imaginary. In a way that is true, but if it walks like a duck and it quacks like a duck ...

Bitcoin is simliar in a way. Bitcoins don't exist in the sense that they are tangible or that they are even stored somewhere, but somehow you can still transfer them.

Not quite. The banks "create" money by essentially betting that all the people they owe money to will not ask for their money at the same time.

If you control your private key....with bitcoin on the other hand, you will always be able to move around all the bitcoin you want as long as you control it regardless of what everyone else wants to do with their bitcoin.

[arxwn]

This is exactly correct.

No, this is incorrect. Most of the money that banks loan out (i.e. That above the reserve ratio - the vast bulk of it) is new money created by the very act of making the loan.

This is why banks need to keep a certain percentage of their money either on deposit at the federal reserve or in their cash vaults, so when depositors want to withdraw their money to another bank or want to withdraw cash fiat they are able to do so.

While true, it does little to illuminate the wealth-stealing scam by which most money comes into existence. The germane part that you seems to be glossing over is the 'certain percentage' part. First, this is a vanishingly small percentage. Historically, 10% was a number often used. I don't know what the current reserve ratio is. However, the 10% is misleading. When the bank loans out the $90 of a $100 deposit, what form is it in? Cash? No. It is in the form of a check. This check will most assuredly be deposited upon another account, adding to that bank's reserves. This bank then loans out $81 of the incoming $90, which is deposited in another bank, who then loans out $72, deposited in...

The ugliness is that this creates a situation in which a bank is overleveraged as a matter of course. If a significant number of depositors show up asking for their money, the bank cannot accommodate them. Indeed this is why the FED exists. If there is a run on the bank, the FED steps in and socializes the losses by printing yet more new money. At the very real cost of stealing more wealth -- in the form of purchasing power -- from each and every person holding dollars before the bailout.

Excactly, for the establishment banks is heads we overleverage, tails you pay for it with currency debasement.
The end result is that the vast majority of users of the currency is always in a loose loose position.
This is the greatest weapon of the status quo.

[Fog Fence]

My Vote:

No way should there be a BTC central bank. I don't accept any argument for centralised banking. Why should a few hundred people have that much power over 7 billion of us? That's how we got into this mess. Why should some traders in NYC be able to affect grain prices in Asia? Why should gold prices be rigged in London every day?

Bitcoin is like Cayenne. It's good on the side, but you can't make a meal out of it.

I hope we have a massively decentralized economy in the future, with competing currencies, trading systems, and platforms. Diversity is the strongest buffer against manipulation, corruption and stealth takeovers. Decentralization isn't a cute fad, it's the natural direction a free, synarchic economy will take.

Peace

[Fog Fence]

You want to buy a house or a car, but you don't have the bitcoins so you need to borrow them. Where are you going to borrow them from if there are no banks?

1) There should be enough free capital floating around the ecosystem that you can crowdfund any money that you need. BTC should be only one of dozens of competing currencies.

2) Once the centralized banking system gets shut down, along with the MIC and govs... the three forces that drain 90 per cent of human capital will be gone, so we'll have trillions more in the planetary economy. It might take decades, but this is where it's going. 90 per cent of our wealth goes to exotic weapons, Cayman bank accounts, overpriced pharmaceuticals and outdated oil technology.  

Where's the bank? I'M THE BANK. And so is anyone else with more than a 1/4 BTC.

Peace on Earth

[Billbags]

Fractional reserves are not free to banks. The bank must pay it's deposit holders and bond holders interest on the money on deposit and lent. When a bank lends money to someone, they need to make sure they are an appropriate risk and price the loan accordingly. When a borrower falls behind on their payments they need to make collection efforts to collect what is owed by the borrower. All of these things cost money.

Bullshit. The fractional part is created out of thin air. That is what makes it fractional. They don't pay any interest on this newly created money.

I think you take the "create money out of thin air" expression too literally. They get money from depositors and they loan it out. That's how money appears to be created since both the depositor and the borrower act as if they have the money.

^Yes, that's the way it's supposed to work. Problem is government overspent long ago and took out loans from the banks but they only have enough money through citizen taxes to pay on the interest of the loans but not the loans themselves.( All Corporate taxes are used for the military budget in the US - (Yearly Military Budget = Yearly Corporate Taxes")(Roads and bridges come from fuel tax with help from state and local taxes)

Our countries are BROKE. The "Bankers" - Not the banks are who receives the lucrative profits of this broke system. They bribe, steal and commit crimes any way they want to so it stays that way. The Bankers even had the government create a special Country Club prision and lienit laws called white collar crimes incase one of them would get caught in a public scandal from time to time..

THE BANKS DO NOT HAVE THE ACTUAL MONEY to make these loans. That's what nobody pays attention to. If the entire banking system of Canada has a total of 4 Billion dollars on reserves, how can they loan out 1.5 trillion dollars and keep loaning out more and more every day? It's even worse in the US. The government Canada/USA have been enabling banks to create money LITERALLY OUT OF THIN AIR in the form of loans. That's right, they type a number in and hit enter, poof, they just created money that DID NOT exist until that keystroke. It's really that simple.

PLEASE watch this 6 minute video and u will understand. It is explained in layman's terms by a 12 yo little girl.

http://m.youtube.com/watch?v=_ae7h8FioX0

Update: You do have to be careful about pointing out the truth. I don't talk about this stuff much because people are conditioned from an early age to believe a certain way through the education system, political correctness, propaganda and just the stupid belief not to question everything - especially the government. Two months ago the FBI sent a letter to all police departments stating all people that quote the law quickly and strongly defend their constitutional rights should be considered "Domestic Terrorists". Google it.

Goverment centralized Banking will be forced to work with bitcoin. No government would let you keep the private keys. You would only be allowed to have a view only wallet(or Mycelium type) and would have to access your funds through a federal institution ran by bankers that would keep the keys available to the government at all times.

[knifeedge]

After this early line.
"To put in simpler terms: banks only has in their vaults a small percentage of the money that their customers gave them;"

I don't think the article will be taken seriously.

[MightyStorm]

Omg, this guy got so many things wrong. Bitcoin exchanges are NOT banks. They are not supposed to lend money. They are basically markets where the only comodity is bitcoin. You go there to buy or sell your bitcoins, that's it. It's no deposit account. Not to mention it will be highly illegal for them to operate as banks without the proper licenses. And creating bitcoin out of thin air is not nocessary to meet demand and create liquidy. If the demand is higher than the supply, the price will raise until enough people are ok to sell at that price and then you get the liquidy. It's called free market. I can't believe they let this stupid person to write for forbes...

[littlebeetle]

Doesn't even appear to understand the difference between a bank and an exchange.

[AllYouCanDo]

Ok this article isn't great, I'll give you all that. But the idea isn't awful. Hear me out.
What he is essentially calling for are two things:
- a kind of insurance fund for exchanges, where each exchange voluntarily participates, and membership implies a certain trustworthiness. If you don't live up to expectations you are sanctioned. Fine.
- a voluntary "fractional reserve" system, where you can either have your exchange account 100% backed, or some portion of that (his suggestion 80%), then exchanges could also become bitcoin lending institutions, with your approval.

These would be voluntary systems.

What he's not proposing, is a system of "bitcoin printing" or QE or any such nonsense.
Leaving some of his pro-state intervention rhetoric aside, it's not a bad idea.

[QuestionAuthority]

You want to buy a house or a car, but you don't have the bitcoins so you need to borrow them. Where are you going to borrow them from if there are no banks?

1) There should be enough free capital floating around the ecosystem that you can crowdfund any money that you need. BTC should be only one of dozens of competing currencies.

2) Once the centralized banking system gets shut down, along with the MIC and govs... the three forces that drain 90 per cent of human capital will be gone, so we'll have trillions more in the planetary economy. It might take decades, but this is where it's going. 90 per cent of our wealth goes to exotic weapons, Cayman bank accounts, overpriced pharmaceuticals and outdated oil technology.  

Where's the bank? I'M THE BANK. And so is anyone else with more than a 1/4 BTC.

Peace on Earth

Oh good, I've been looking all over for the bank. I need you to loan me $500,000 so I can buy a new house. Do you have a branch office where can I fill out the application?

[Jamacn]

Sometimes watching this forum is like watching kids grow up. That's not a negative thing. In fact, it's kind of cool to watch especially with someone that has taken a hard line view for a long time. Then some major event happens like Pirates Ponzi and they come to the realization that things work the way they do for a reason. You can almost see them saying in their heads, "now I know why fraud controls exist, now I know why the Fed is there, now I understand the reason for banks and lending, now I understand international trade controls, now I know the reason for legislating financial controls, now I know why the barter system was replaced, now I know why you don't trust strangers.........

I think you don't really need a central bank, but also need a credible third party to protect our interests.

[Bejkn]

Sometimes watching this forum is like watching kids grow up. That's not a negative thing. In fact, it's kind of cool to watch especially with someone that has taken a hard line view for a long time. Then some major event happens like Pirates Ponzi and they come to the realization that things work the way they do for a reason. You can almost see them saying in their heads, "now I know why fraud controls exist, now I know why the Fed is there, now I understand the reason for banks and lending, now I understand international trade controls, now I know the reason for legislating financial controls, now I know why the barter system was replaced, now I know why you don't trust strangers.........

I think you don't really need a central bank, but also need a credible third party to protect our interests.

No,
fortunately Bitcoin is fully transparent, and Bitcoin basically works as most believe it should work, like only being able to spend existing coin, which can be spend later on by someone else.

[QuestionAuthority]

You want to buy a house or a car, but you don't have the bitcoins so you need to borrow them. Where are you going to borrow them from if there are no banks?

1) There should be enough free capital floating around the ecosystem that you can crowdfund any money that you need. BTC should be only one of dozens of competing currencies.

2) Once the centralized banking system gets shut down, along with the MIC and govs... the three forces that drain 90 per cent of human capital will be gone, so we'll have trillions more in the planetary economy. It might take decades, but this is where it's going. 90 per cent of our wealth goes to exotic weapons, Cayman bank accounts, overpriced pharmaceuticals and outdated oil technology.  

Where's the bank? I'M THE BANK. And so is anyone else with more than a 1/4 BTC.

Peace on Earth

Oh good, I've been looking all over for the bank. I need you to loan me $500,000 so I can buy a new house. Do you have a branch office where can I fill out the application?

I still haven't been answered. Which one of you geniuses is loaning me a half million dollars in btc?

[jyakulis]

The benefit of fractional reserve banking is that it has positive effect on the economy by allowing banks to extend credit to people who are in need of it, provided the borrowers agree to pay back with an interest.

http://www.forbes.com/sites/ericxlmu/2014/08/24/why-there-should-be-a-bitcoin-central-bank/

I stopped reading there.

Let me sum up what you really said. The positive aspect of fractional reserve banking is that it let's bank create money they do not have to extend credit to 3rd world countries at unpayable interest rates to later confiscate hard assets when loans created with money that they did not have are defaulted on. And additionally, will create "insurance" companies to back said money that does not exist to cover up their fraud.

If they wanted to help people why don't they give them the loan interest free. They created the money from money they did not have. All the benefit is on them in that they possess the hard asset if the loan defaults. Why the interest? They say they want to help people. Well, do it or shut up.

[odolvlobo]

The benefit of fractional reserve banking is that it has positive effect on the economy by allowing banks to extend credit to people who are in need of it, provided the borrowers agree to pay back with an interest.

http://www.forbes.com/sites/ericxlmu/2014/08/24/why-there-should-be-a-bitcoin-central-bank/

I stopped reading there.

Ignorance is not an acceptable excuse.

[odolvlobo]

You want to buy a house or a car, but you don't have the bitcoins so you need to borrow them. Where are you going to borrow them from if there are no banks?

1) There should be enough free capital floating around the ecosystem that you can crowdfund any money that you need. BTC should be only one of dozens of competing currencies.

2) Once the centralized banking system gets shut down, along with the MIC and govs... the three forces that drain 90 per cent of human capital will be gone, so we'll have trillions more in the planetary economy. It might take decades, but this is where it's going. 90 per cent of our wealth goes to exotic weapons, Cayman bank accounts, overpriced pharmaceuticals and outdated oil technology.  

Where's the bank? I'M THE BANK. And so is anyone else with more than a 1/4 BTC.

Peace on Earth

Oh good, I've been looking all over for the bank. I need you to loan me $500,000 so I can buy a new house. Do you have a branch office where can I fill out the application?

I still haven't been answered. Which one of you geniuses is loaning me a half million dollars in btc?

The capability may not exist now, but it will exist in the future. P2P lending is growing.

[BurtW]

You want to buy a house or a car, but you don't have the bitcoins so you need to borrow them. Where are you going to borrow them from if there are no banks?

1) There should be enough free capital floating around the ecosystem that you can crowdfund any money that you need. BTC should be only one of dozens of competing currencies.

2) Once the centralized banking system gets shut down, along with the MIC and govs... the three forces that drain 90 per cent of human capital will be gone, so we'll have trillions more in the planetary economy. It might take decades, but this is where it's going. 90 per cent of our wealth goes to exotic weapons, Cayman bank accounts, overpriced pharmaceuticals and outdated oil technology.  

Where's the bank? I'M THE BANK. And so is anyone else with more than a 1/4 BTC.

Peace on Earth

Oh good, I've been looking all over for the bank. I need you to loan me $500,000 so I can buy a new house. Do you have a branch office where can I fill out the application?

I still haven't been answered. Which one of you geniuses is loaning me a half million dollars in btc?

The capability may not exist now, but it will exist in the future. P2P lending is growing.

Just go to BTCjam and post a loan request for the $500,000.  Good luck!

[BurtW]

Quit your belly aching about evil loaning, banking and fractional reserve.  These things cannot be stopped so deal with it.  Make personal choices that make sense to you.

Bitcoin lending will happen (already does).

If Bitcoin goes mainstream then Bitcoin banks will happen.

No amount of cussing and discussing this in a forum in the backwaters of the internet is going to stop it.  No amount of calling it stupid is going to stop it because if someone can make money doing it - they will.

So, when the time comes it will be up to you to personally decide if lending your precious BTC to a bank is worth the risk or not by looking at the various factors:  How much interest are they paying me?  Is the interest in BTC or fiat?  How is their insurance in case of theft or bank failure?  What is their reserves?  Do they periodically prove their reserves.  How much of my BTC do I want to risk and how much do I want to keep as cash, right here in my trusty Trezor?  Etc.

Also, when the time comes it will be up to you to decide if you are going to accept a Bitcoin susbstitute for payment or not.  Will you accept a check from a buddy's Bitcoin account that you can deposit in your Bitcoin account or cash in for actual real live Bitcoins at his bank?  If you do then you are participating in the fractional reserve system and accepting a Bitcoin substitute until you claim the real Bitcoins and during that time you have personally inflated the Bitcoin money supply - you.  What about the place you work?  Would you accept a Bitcoin check from them for your salary?  Or will you insist they pay you in "cash", that is actual Bitcoins from their wallet?  Assume you know the IOU is good. Does it hurt to accept an IOU until you get to their bank and have the bank put the BTC into your wallet?  Again, for that time you have made a personal decision to inflate the Bitcoin money supply.  You bastardo!

Fractional reserve banking of BTC cannot be stopped but you can choose how much you want to participate in it.