Why There Should Be A Bitcoin Central Bank

[Cortex7]

I'm not sure if it's mentioned before.


FRB is not necessary for lending.

A borrower can just issue bonds or the similar like time deposits for raising the fund.
And the bonds are not used as the accounting units or medium of exchange like a currency.

Am I correct?

You are correct, FRB is not necessary for lending (but the banks love it).
Crowdfunding or borrowing from a mate enables one to obtain a loan without a bank in the loop, let alone a FRB.



You probably already know this but I'll write it here for others also...



Every form of currency, be it gold, bitcoin or fiat notes is simply a token, a promise from one party to another to make good on a debt.

All money is simply a record of debt:

If I work for you then you can give me a token that promises I will receive that work back off you, if you give me a widely accepted token (money) then I can get the work off someone else in the future.

In the good old days it was done with a handshake, eye contact and honor. All debts were carried in the brain as a memory, and we still do it today to a certain extent (one good turn deserves another and all).

The debt is not really settled until the worker has been worked for in some way or received food or some other desirable goods or pleasures, the worker is not really "paid" when they receive a wage, they are given a promise that someone will work for them in the future or they may receive some goods in the future.

FRB allows banks to create promisory notes for work not rendered yet. It's ridiculous that any citizen would condone it because this essentially dilutes the promisory notes that they worked so hard to aquire. The net effect is that laborers do more work than they should to obtain their promises.

A bitcoin centric analogy... Running a FRB is equivalent to joining the mining network and spoofing your hashrate to be 10X what it really is. The other miners would not like it, not one bit!

Central banks suck, anyone who says otherwise is a central banker or a dunce.

[jbreher]

Are they stealing from BFL customers and people who had funds in Mt. Gox too? 

Yes. The new money created by lending in fractional reserve banking derives its purchasing power from the theft of purchasing power held by everyone at the instant before the new money was created.

Except you not have the same economy to begin with so you don't know how much money would have in the first place.  You are comparing apples and oranges.  [ a buncha completely unrelated stuff elided ]

I don't know why you started with the word "Except". I'm not comparing apples and oranges - I am making no comparison whatsoever. I am simply making a factual statement about the nature of fractional reserve banking.

[jbreher]

Yes. The new money created by lending in fractional reserve banking drives its purchasing power from the theft of purchasing power held by everyone at the instant before the new money was created.

False. Money created by fractional reserve banking only increases the supply of money,

Yes - it most certainly increases the supply of money. As I previously stated. Question to you: The sum total of all goods and services is not changed by the act of zapping this new money into existence. Yet this newly-created money has a value, in that it can purchase these goods and services. So from whence does this value come?

it does not necessarily increase the rate of inflation...

I didn't say anything about inflation. I don't know why you are 'rebutting' me upon it. Let us settle the above discrepancy first, then we can circle around to this newly-introduced topic?

[hdbuck]

lock this thread? anyone?

[QuestionAuthority]

lock this thread? anyone?

Receive motion and second. It has been moved and seconded the meeting be adjourned. All in favor say 'Aye..

[Cortex7]

lock this thread? anyone?

Receive motion and second. It has been moved and seconded the meeting be adjourned. All in favor say 'Aye..

Aye.

[HELP.org]

I run the Bitcoin Central Bank:

http://BitcoinCentralBank.com

if you have any questions let me know.

[Guido]

The elimination of a central bank is one of the key factors in the creation and the beauty of BTC.   A central bank would just be to apply old school banking procedures to crypto-currencies.   Not to mention a central bank would quickly become the target of more cyber attacks than probably anything on the planet.

agreed +1

[HELP.org]

The elimination of a central bank is one of the key factors in the creation and the beauty of BTC.   A central bank would just be to apply old school banking procedures to crypto-currencies.   Not to mention a central bank would quickly become the target of more cyber attacks than probably anything on the planet.

agreed +1

You mean like Mt. Gox, Bitfloor, myBitcoin, ...?  Looks like Bitcoin didn't solve the problems.   

[FattyMcButterpants]

...
Price of DJIA today ~17,100 (call it 17,000)

Return: ~24.7x in ~40 years.

Your chart has the CPI being at somewhere between one and three in 1910 (call it 1.1) and is at roughly 27 now (call it 28). That means the CPI has gone up by 25.45x in 102 years.

If someone had taken one dollar in 1910 when the fed was created, kept it in a mattress, then invested it in the stock market in 1975, they would have come close to beating 102 years of inflation in just 40 years and this does not count dividends which would be substantial (several percentage points per year).

Yes you could have beaten inflation over 100 years by investing a dollar from 1910 in 1975, because the ponzi scheme only started in 71 and we all know if you get in early in a Ponzi scheme it's great ... But get in after the peak and it's not so great

Thanks to central banks the current global money system is like musical chairs, yes the musics still playing and the players are still dancing around, but there's only one chair left, and there's a loaded gun on it, the game wont end well.

The most brittle aspect at the moment are the derivatives markets where all the book excesses have been pushed into.

There are five "too big to fail" banks in the United States that each have more than 40 trillion dollars in exposure to derivatives.  Today, the U.S. national debt is sitting at a grand total of about 17.7 trillion dollars, so when we are talking about 40 trillion dollars we are talking about an amount of money that is almost unimaginable.  And unlike stocks and bonds, these derivatives do not represent "investments" in anything.  They can be incredibly complex, but essentially they are just paper wagers about what will happen in the future.  The truth is that derivatives trading is not too different from betting on baseball or football games.  Trading in derivatives is basically just a form of legalized gambling, and the "too big to fail" banks have transformed Wall Street into the largest casino in the history of the planet.  When this derivatives bubble bursts (and as surely as I am writing this it will), the pain that it will cause the global economy will be greater than words can describe.

SOURCE: http://theeconomiccollapseblog.com/archives/tag/derivatives-crisis

I think the point is that you could beat 100 years of inflation by investing for only 40 years even after having 60 years of inflation eating away at the value of your money. Historically speaking investments in the stock market have outperformed the rate of inflation by ~7% per year.

To suggest that investing in the stock market is investing in a ponzi is just crazy. Companies create actual value by producing goods and offering services which results in earnings (and potential cash flow) that are available to their shareholders.

Much of the derivative risk that large banks "have" is not actually risk because many of the derivatives cancel each other out and is hedged. To say that banks could potentially lose $40 trillion is really not accurate.

[Cortex7]

...
Price of DJIA today ~17,100 (call it 17,000)

Return: ~24.7x in ~40 years.

Your chart has the CPI being at somewhere between one and three in 1910 (call it 1.1) and is at roughly 27 now (call it 28). That means the CPI has gone up by 25.45x in 102 years.

If someone had taken one dollar in 1910 when the fed was created, kept it in a mattress, then invested it in the stock market in 1975, they would have come close to beating 102 years of inflation in just 40 years and this does not count dividends which would be substantial (several percentage points per year).

Yes you could have beaten inflation over 100 years by investing a dollar from 1910 in 1975, because the ponzi scheme only started in 71 and we all know if you get in early in a Ponzi scheme it's great ... But get in after the peak and it's not so great

Thanks to central banks the current global money system is like musical chairs, yes the musics still playing and the players are still dancing around, but there's only one chair left, and there's a loaded gun on it, the game wont end well.

The most brittle aspect at the moment are the derivatives markets where all the book excesses have been pushed into.

There are five "too big to fail" banks in the United States that each have more than 40 trillion dollars in exposure to derivatives.  Today, the U.S. national debt is sitting at a grand total of about 17.7 trillion dollars, so when we are talking about 40 trillion dollars we are talking about an amount of money that is almost unimaginable.  And unlike stocks and bonds, these derivatives do not represent "investments" in anything.  They can be incredibly complex, but essentially they are just paper wagers about what will happen in the future.  The truth is that derivatives trading is not too different from betting on baseball or football games.  Trading in derivatives is basically just a form of legalized gambling, and the "too big to fail" banks have transformed Wall Street into the largest casino in the history of the planet.  When this derivatives bubble bursts (and as surely as I am writing this it will), the pain that it will cause the global economy will be greater than words can describe.

SOURCE: http://theeconomiccollapseblog.com/archives/tag/derivatives-crisis

I think the point is that you could beat 100 years of inflation by investing for only 40 years even after having 60 years of inflation eating away at the value of your money. Historically speaking investments in the stock market have outperformed the rate of inflation by ~7% per year.

To suggest that investing in the stock market is investing in a ponzi is just crazy. Companies create actual value by producing goods and offering services which results in earnings (and potential cash flow) that are available to their shareholders.

Much of the derivative risk that large banks "have" is not actually risk because many of the derivatives cancel each other out and is hedged. To say that banks could potentially lose $40 trillion is really not accurate.

I'm not suggesting that the companies are Ponzis, only a few like MLM marketing sites etc.

I'm saying the base layer, the fiat money is a Ponzi. The companies are fine, the money isn't.

Understand what money is: a ledger of debt for a real world asset or work rendered. To issue money before that real world thing has occured is not possible, a fiat token is not real money, the give-away is in the Latin name itself.

I wonder what advantages you see in bitcoin other than "there's an app for that"?

I agree that the total derivatives market value could not be lost entirely, the books would balance to some degree if it were all unwound, but I think they would be a long way from fully balanced. The derivatives market is a magical construct that allows accelerating future liabilities to be swept under a seemingly infinite rug.

[bitok.com]

The elimination of a central bank is one of the key factors in the creation and the beauty of BTC.   A central bank would just be to apply old school banking procedures to crypto-currencies.   Not to mention a central bank would quickly become the target of more cyber attacks than probably anything on the planet.

agreed +1

It'll also ruin the anonymity which Bitcoin system is based on.

[Q7]

After having followed closely on this subject, i must say the more we try to provide a solution and using different approaches to solve the core issue, the more problem we will end up creating. In fact for me, the word 'central' bank itself already defeats the decentralization concept of bitcoin we are trying to achieve here. Alas...

[jerelimZ]

The beauty of cryptocurrency is decentralization, any centralization like exchanges adding potential risks shaddy operations are performed because you just have trust central services without full transparency they are and stay honest. Look at the MtGox fail, so any centralized shaddy service (not fully transparent) is going to fail sonner or later is my theory.

[jbreher]

I run the Bitcoin Central Bank:

http://BitcoinCentralBank.com

if you have any questions let me know.

Plus two points for cleverness.

Minus two points for truth-in-naming. Or rather, lack thereof.

Good luck to your endeavor.

[Argwai96]

...
Price of DJIA today ~17,100 (call it 17,000)

Return: ~24.7x in ~40 years.

Your chart has the CPI being at somewhere between one and three in 1910 (call it 1.1) and is at roughly 27 now (call it 28). That means the CPI has gone up by 25.45x in 102 years.

If someone had taken one dollar in 1910 when the fed was created, kept it in a mattress, then invested it in the stock market in 1975, they would have come close to beating 102 years of inflation in just 40 years and this does not count dividends which would be substantial (several percentage points per year).

Yes you could have beaten inflation over 100 years by investing a dollar from 1910 in 1975, because the ponzi scheme only started in 71 and we all know if you get in early in a Ponzi scheme it's great ... But get in after the peak and it's not so great

Thanks to central banks the current global money system is like musical chairs, yes the musics still playing and the players are still dancing around, but there's only one chair left, and there's a loaded gun on it, the game wont end well.

The most brittle aspect at the moment are the derivatives markets where all the book excesses have been pushed into.

There are five "too big to fail" banks in the United States that each have more than 40 trillion dollars in exposure to derivatives.  Today, the U.S. national debt is sitting at a grand total of about 17.7 trillion dollars, so when we are talking about 40 trillion dollars we are talking about an amount of money that is almost unimaginable.  And unlike stocks and bonds, these derivatives do not represent "investments" in anything.  They can be incredibly complex, but essentially they are just paper wagers about what will happen in the future.  The truth is that derivatives trading is not too different from betting on baseball or football games.  Trading in derivatives is basically just a form of legalized gambling, and the "too big to fail" banks have transformed Wall Street into the largest casino in the history of the planet.  When this derivatives bubble bursts (and as surely as I am writing this it will), the pain that it will cause the global economy will be greater than words can describe.

SOURCE: http://theeconomiccollapseblog.com/archives/tag/derivatives-crisis

I think the point is that you could beat 100 years of inflation by investing for only 40 years even after having 60 years of inflation eating away at the value of your money. Historically speaking investments in the stock market have outperformed the rate of inflation by ~7% per year.

To suggest that investing in the stock market is investing in a ponzi is just crazy. Companies create actual value by producing goods and offering services which results in earnings (and potential cash flow) that are available to their shareholders.

Much of the derivative risk that large banks "have" is not actually risk because many of the derivatives cancel each other out and is hedged. To say that banks could potentially lose $40 trillion is really not accurate.

I'm not suggesting that the companies are Ponzis, only a few like MLM marketing sites etc.

I'm saying the base layer, the fiat money is a Ponzi. The companies are fine, the money isn't.

Understand what money is: a ledger of debt for a real world asset or work rendered. To issue money before that real world thing has occured is not possible, a fiat token is not real money, the give-away is in the Latin name itself.

I wonder what advantages you see in bitcoin other than "there's an app for that"?

I agree that the total derivatives market value could not be lost entirely, the books would balance to some degree if it were all unwound, but I think they would be a long way from fully balanced. The derivatives market is a magical construct that allows accelerating future liabilities to be swept under a seemingly infinite rug.

The work that the bitcoin central bank does (aka the miners) is not useful to anyone unless they hold bitcoin (and need to keep their money secure). The use for bitcoin that satashi gave in his white paper is the only "real" use - a p2p method of payment that does not rely on a central authority to keep track of your balance.

The work that fiat money can be converted into however is work that is necessary for the purchaser of such work and is diverse

[odolvlobo]

Regardless of your feelings on the evil of fractional reserve banking and central banks, FRB will be implemented with Bitcoin, as long as it is legal. When Bitcoin FRB is put into place, a central bank will be necessary. The central bank will not be able to print money, but it will control Bitcoin bank reserves, and so it will have some limited power to manipulate inflation/deflation.

You can whine about how it goes against the spirit of Bitcoin or how it violates the wishes of our Lord Satoshi, but I feel that it is a certainty unless laws are enacted to prevent it.

[Cortex7]

Regardless of your feelings on the evil of fractional reserve banking and central banks, FRB will be implemented with Bitcoin, as long as it is legal. When Bitcoin FRB is put into place, a central bank will be necessary. The central bank will not be able to print money, but it will control Bitcoin bank reserves, and so it will have some limited power to manipulate inflation/deflation.

You can whine about how it goes against the spirit of Bitcoin or how it violates the wishes of our Lord Satoshi, but I feel that it is a certainty unless laws are enacted to prevent it.

If a central bank was not able to print money then how on earth do you think it could create a fractional reserve currency?

The only way to create a fractional reserve on top of bitcoin is to create a new token layer atop bitcoin, these tokens are issued (printed) or withdrawn (destroyed) by the central bank. Giving it lots of power to control inflation/deflation.

Varying the fractional ratio from 1:1 to 10:1 gives a full magnitude of inflationary/deflationary control, which isn't needed by the way for a stable economy.

Of course unlike the gold backed bretton woods system, a bitcoin backed system would be transparent and auditable, well at least the reserves could be audited, but it would be difficult to audit the issuance, you would have to trust some be-suited "expert" who flew around on private jets, yeah like he's gonna give a shit about joe public .

[odolvlobo]

Regardless of your feelings on the evil of fractional reserve banking and central banks, FRB will be implemented with Bitcoin, as long as it is legal. When Bitcoin FRB is put into place, a central bank will be necessary. The central bank will not be able to print money, but it will control Bitcoin bank reserves, and so it will have some limited power to manipulate inflation/deflation.

You can whine about how it goes against the spirit of Bitcoin or how it violates the wishes of our Lord Satoshi, but I feel that it is a certainty unless laws are enacted to prevent it.

If a central bank was not able to print money then how on earth do you think it could create a fractional reserve currency?

The only way to create a fractional reserve on top of bitcoin is to create a new token layer atop bitcoin, these tokens are issued (printed) or withdrawn (destroyed) by the central bank. Giving it lots of power to control inflation/deflation.

That's not how FRB works.

[Cortex7]

Regardless of your feelings on the evil of fractional reserve banking and central banks, FRB will be implemented with Bitcoin, as long as it is legal. When Bitcoin FRB is put into place, a central bank will be necessary. The central bank will not be able to print money, but it will control Bitcoin bank reserves, and so it will have some limited power to manipulate inflation/deflation.

You can whine about how it goes against the spirit of Bitcoin or how it violates the wishes of our Lord Satoshi, but I feel that it is a certainty unless laws are enacted to prevent it.

If a central bank was not able to print money then how on earth do you think it could create a fractional reserve currency?

The only way to create a fractional reserve on top of bitcoin is to create a new token layer atop bitcoin, these tokens are issued (printed) or withdrawn (destroyed) by the central bank. Giving it lots of power to control inflation/deflation.

That's not how FRB works.

Yes it is.

FRB creates new money out of thin air every time a new loan is created.

In asset backed FRB: If FRB bank has 100 real units of assets to back the FRB then it is "allowed" to issue up to 1000 certificates for unit assets.

The term "run on the bank" means everyone goes to redeem the certificates at once. That would be a problem because 90% of those certificates are just printed bullshit.

The fraudulent activity is said to be "needed" as a way to control inflation/deflation, but that excuse is a crock of shit, it's only needed to financially rape the citizens.