Why There Should Be A Bitcoin Central Bank

[Gleb Goodston]

Central bank for Bitcoin? Do you even know what Bitcoin is as a symbol & concept?

[FattyMcButterpants]

For:
As the article points out we would have a central authority with the ability to audit these exchanges and penalize them for any wrong doing,

Against: this function does not require a central bank. As half of the exchanges' business is fiat, there are already mechanisms in place to police this activity.

The function of a Bitcoin central bank would be to protect member banks against bank runs. Because member banks would be at risk from each other, they would agree to follow certain rules and submit to regular audits.

The primary function of a central bank is actually to regulate the supply of currency into the economy. Most central banks will increase the amount of currency when inflation is lower then it wants (usually via lower interest rates but they have other tools as well) and will decrease the amount of currency when inflation is higher then it wants (usually via higher interest rates).

I would argue that the Bitcoin protocol already serves this function for us via changes to the difficulty every ~2 weeks.

[jbreher]

For:
As the article points out we would have a central authority with the ability to audit these exchanges and penalize them for any wrong doing,

Against: this function does not require a central bank. As half of the exchanges' business is fiat, there are already mechanisms in place to police this activity.

The function of a Bitcoin central bank would be to protect member banks against bank runs. Because member banks would be at risk from each other, they would agree to follow certain rules and submit to regular audits.

You are making a new and different claim. I'm more than happy to let anyone foolish enough to employ fractional reserve Bitcoin banking to lose all their Bitcoin in the inevitable implosion.

[waser12]

Bitcoin is decentralized, its for this reason that we like the bitcoin, we are the masters of our own money.

[Some1else0]

One of the main attractions for Bitcoin is it's decentralization. I'd rather we not have a central bank.

[odolvlobo]

One of the main attractions for Bitcoin is it's decentralization. I'd rather we not have a central bank.

If a bunch of people want to get together and form a Bitcoin central bank, there is nothing you can do about it, except refuse to participate and convince others to refuse also. Unfortunately, fractional reserve banking affects the value of all bitcoins, so they will affect you whether you participate or not.

[Cortex7]

One of the main attractions for Bitcoin is it's decentralization. I'd rather we not have a central bank.

If a bunch of people want to get together and form a Bitcoin central bank, there is nothing you can do about it, except refuse to participate and convince others to refuse also. Unfortunately, fractional reserve banking affects the value of all bitcoins, so they will affect you whether you participate or not.

The bold part sucks and you should agree, why should non participants take a hit on their wealth.

I agree there is nothing individuals could do other than jump ship onto another coin, should we applaud that? I think not.

In the olden days before fractional reserve banking a man could afford a house with 2 years of wages. Loans were often arranged within families or the person rented and saved.

Fractional reserve robs all people of their time and labor by continually pushing debt into the future in a compounding manner.

Globally it will be difficult to reverse the situation, much like withdrawing off a serious drug.

Large loans could be arranged using a P2P mechanism, 1 large loan consisting of many micro loans, like crowd funding in a way. I agree this would NOT transpose onto the current situation where debt levels are large relative to GDP. To rectify the current situation will be painful or may require collapse and "reset".

Realize that there is not enough labor and resources on the planet to balance the books as they stand thanks to fractional reserve which has continually pushed more and more liabilities into the derivatives market, there is only the possibility that the books may be balanced in the future, but the longer a fractional reserve system runs the less probable that becomes, throughout history they have always ended in defaulting leaving peasant bag holders.

Fractional reserve is an irresponsible idea for the financial security of the people, the people should see the long game instead of looking no further than the TV screen.

[jbreher]

One of the main attractions for Bitcoin is it's decentralization. I'd rather we not have a central bank.

If a bunch of people want to get together and form a Bitcoin central bank, there is nothing you can do about it, except refuse to participate and convince others to refuse also.

indeed... indeed...

So 'splain me: When it all comes crashing down, how is your vaunted 'central bank' going to make the end users 'whole'? Unlike the FED, it has no ability to create monetary units out of thin air.

Unfortunately, fractional reserve banking affects the value of all bitcoins, so they will affect you whether you participate or not.

No, FRB will affect the value of Bitcoin-denominated-IOUs. It will not affect the value of Bitcoins. Bitcoin user unaffected.

[Cortex7]

...
No, FRB will affect the value of Bitcoin-denominated-IOUs. It will not affect the value of Bitcoins. Bitcoin user unaffected.

Actually he is correct, the global market price for the base reserve asset is raped by fractional reserve.

The problem lies with the fact that most users perceive the IOU to have the same value as the base asset. ( although as we quite rightly know... MATHEMATICALLY  IT DOES NOT! )

FRB schemes use promisory notes. Those IOUs promise to pay the bearer the equivalent in reserve asset, prior to 1971 if you walked into a US bank you could demand gold for the note.

The best way to start the scheme if you have zero good will is with a full reserve central bank and promisory notes (basically like an old goldsmith), and then slightly lower the reserve requirement for "inflationary control measures" aka profit skimming.

The ignorance of the users allows the FRB to increase fractional ratio slowly and never get a "run on the bank" until the jig is up and the base assets have long left the safe. Then the LLC closes shop and leaves crying bag holders.

[jbreher]

...
No, FRB will affect the value of Bitcoin-denominated-IOUs. It will not affect the value of Bitcoins. Bitcoin user unaffected.

Actually he is correct, the global market price for the base reserve asset is raped by fractional reserve.

the problem lies with the fact that most users perceive the IOU to have the same value as the base asset.

Throughout history FRB schemes are always started with promisory notes. Those IOUs promise to pay the bearer the equivalent in reserve asset.

The ignorance of the users allows the FRB to increase fractional ratio slowly and never get a "run on the bank".

I don't think so. In contrast to a Bitcoin, a Federal Reserve Note (colloquially and quaintly referred to as the 'dollar') is already nothing more than an IOU. Its nature is unaffected by FRB.

A Bitcoin, OTOH, is its own thing - it stands apart, inviolate. It is of a completely different nature than a Bitcoin-denominated-IOU.

The powers that be, when they get ramped up on the matter, will have a big megaphone. They will advertise far and wide whatever illusory 'benefits' (i.e. lies) they can get away with. But we have a window open to spread the message that a Bitcoin-denominated-IOU is a mere shadow of a Bitcoin. _I_ will certainly never accept a Bitcoin-denominated-IOU in lieu of a Bitcoin. Will you? Will odolvlobo? Who, once made aware of the difference, will not discount the value of the Bitcoin-denominated-IOU? Only the ignorant or the stupid.

And even if the masses get hoodwinked, it only delays the inevitable tears. When the entire sham of Bitcoin-denominated-IOUs comes crashing down, those that clung to the difference between Bitcoin-denominated-IOUs and actual Bitcoins will still have their Bitcoin. They will prosper when those that ate from the golden apple of FRB are rewarded with financial amoebic dysentery. And the balance returns.

Long term - Bitcoin user unaffected.

[Cortex7]

...
No, FRB will affect the value of Bitcoin-denominated-IOUs. It will not affect the value of Bitcoins. Bitcoin user unaffected.

Actually he is correct, the global market price for the base reserve asset is raped by fractional reserve.

the problem lies with the fact that most users perceive the IOU to have the same value as the base asset.

Throughout history FRB schemes are always started with promisory notes. Those IOUs promise to pay the bearer the equivalent in reserve asset.

The ignorance of the users allows the FRB to increase fractional ratio slowly and never get a "run on the bank".

I don't think so. In contrast to a Bitcoin, a Federal Reserve Note (colloquially and quaintly referred to as the 'dollar') is already nothing more than an IOU. Its nature is unaffected by FRB.

A Bitcoin, OTOH, is its own thing - it stands apart, inviolate. It is of a completely different nature than a Bitcoin-denominated-IOU.

The powers that be, when they get ramped up on the matter, will have a big megaphone. They will advertise far and wide whatever illusory 'benefits' (i.e. lies) they can get away with. But we have a window open to spread the message that a Bitcoin-denominated-IOU is a mere shadow of a Bitcoin. _I_ will certainly never accept a Bitcoin-denominated-IOU in lieu of a Bitcoin. Will you? Will odolvlobo? Who, once made aware of the difference, will not discount the value of the Bitcoin-denominated-IOU? Only the ignorant or the stupid.

And even if the masses get hoodwinked, it only delays the inevitable tears. When the entire sham of Bitcoin-denominated-IOUs comes crashing down, those that clung to the difference between Bitcoin-denominated-IOUs and actual Bitcoins will still have their Bitcoin. They will prosper when those that ate from the golden apple of FRB are rewarded with financial amoebic dysentery. And the balance returns.

Long term - Bitcoin user unaffected.

No, you're thinking of US dollar in its current full fiat form, I agree, that is tied to NOTHING.

I am talking about FRB promisory note. Fractional Reseve Banking... the first stepping stone to full fiat. You can't boil the frogs too quickly or they jump out the pot. FRB will happen before fiat.

Prior to 1971 you could take $1 US dollar bill into a bank and collect the gold in hand.

[Cortex7]

To clarify, no I would never take an IOU in lieu of the real thing.

But as odolvlobo says those with no choice will (those looking for large loans)

[wunkbone]

One of the main attractions for Bitcoin is it's decentralization. I'd rather we not have a central bank.

If a bunch of people want to get together and form a Bitcoin central bank, there is nothing you can do about it, except refuse to participate and convince others to refuse also. Unfortunately, fractional reserve banking affects the value of all bitcoins, so they will affect you whether you participate or not.

I would disagree. The reason why fractional reserve banking works is because the government backs the banks (in the form of deposit insurance up to $250,000 per depositor) and the reason why the government is able to do this is because it can literally print an unlimited number of additional dollars by actually printing dollars (it generally will not need to actually resort to doing this but this is the ultimate reason why it can guarantee deposits).

With bitcoin on the other hand it is not possible to guarantee deposits in the same manor. There is no entity that is able to print unlimited amounts of bitcoin

[jbreher]

No, you're thinking of US dollar in its current full fiat form, I agree, that is tied to NOTHING.

I am talking about FRB promisory note. Fractional Reseve Banking... the first stepping stone to full fiat.

I think we may agree on the mechanisms, but have different projected outlooks.

Prior to 1971 you could take $1 US dollar bill into a bank and collect the gold in hand.

Well, no. Since 1934, (give or take a year), that option was not available to any US citizen, nor any non-governmental actor.

<tinfoil alert>
Kennedy was working on that problem, but then someone killed him. Seems quite clear that Oswald's Carcano magic bullet was not the only projectile that made impact, but that's another discussion for another day.

[Cortex7]

No, you're thinking of US dollar in its current full fiat form, I agree, that is tied to NOTHING.

I am talking about FRB promisory note. Fractional Reseve Banking... the first stepping stone to full fiat.

I think we may agree on the mechanisms, but have different projected outlooks.

Prior to 1971 you could take $1 US dollar bill into a bank and collect the gold in hand.

Well, no. Since 1934, (give or take a year), that option was not available to any US citizen, nor any non-governmental actor.

<tinfoil alert>
Kennedy was working on that problem, but then someone killed him. Seems quite clear that Oswald's Carcano magic bullet was not the only projectile that made impact, but that's another discussion for another day.

I was just pointing out that fractional reserve banking WILL debase the market price of the underlying reserve asset, and if it were to happen atop bitcoin then we would all have our coins debased even if we did not use the FRB.

Sorry I forgot about gold prohibition in USA, guess that was step 2 of 3 to full fiat. I am more familiar with UK history. Am I correct in thinking USA still printed "promise to pay the bearer" on the notes prior to 71?

EDIT: My projected outlook is economic systemic collapse and reset. Mathematically it is not a question of if but when. It was planned and will be repeated, just as it has in the past. Standard usury practiced for milenia already. Of course anything standing in the way of it risks being destroyed, including people.

[odolvlobo]

One of the main attractions for Bitcoin is it's decentralization. I'd rather we not have a central bank.

If a bunch of people want to get together and form a Bitcoin central bank, there is nothing you can do about it, except refuse to participate and convince others to refuse also. Unfortunately, fractional reserve banking affects the value of all bitcoins, so it will affect you whether you participate or not.

I would disagree. The reason why fractional reserve banking works is because the government backs the banks (in the form of deposit insurance up to $250,000 per depositor) and the reason why the government is able to do this is because it can literally print an unlimited number of additional dollars by actually printing dollars (it generally will not need to actually resort to doing this but this is the ultimate reason why it can guarantee deposits).

With bitcoin on the other hand it is not possible to guarantee deposits in the same manor. There is no entity that is able to print unlimited amounts of bitcoin

FRB existed long before the FDIC and long before U.S. left the gold standard. If there is a run on a bank, the central bank has the assets to back it. The danger is that the run could be too big for the central bank to handle. I imagine something like that is what triggered the Great Depression.

[wunkbone]

One of the main attractions for Bitcoin is it's decentralization. I'd rather we not have a central bank.

If a bunch of people want to get together and form a Bitcoin central bank, there is nothing you can do about it, except refuse to participate and convince others to refuse also. Unfortunately, fractional reserve banking affects the value of all bitcoins, so it will affect you whether you participate or not.

I would disagree. The reason why fractional reserve banking works is because the government backs the banks (in the form of deposit insurance up to $250,000 per depositor) and the reason why the government is able to do this is because it can literally print an unlimited number of additional dollars by actually printing dollars (it generally will not need to actually resort to doing this but this is the ultimate reason why it can guarantee deposits).

With bitcoin on the other hand it is not possible to guarantee deposits in the same manor. There is no entity that is able to print unlimited amounts of bitcoin

FRB existed long before the FDIC and long before U.S. left the gold standard. If there is a run on a bank, the central bank has the assets to back it. The danger is that the run could be too big for the central bank to handle. I imagine something like that is what triggered the Great Depression.

Bank insurance became a concept that was used in the US banking system after many banks failed after the (stock market) crash of 1929. At this point the fed was not something that would back banks, it was something that would facilitate transfers between various banks.

[Brmaster]

Does LakeBTC ready to do any audit if there is a true Bitcoin Central Bank

[BitmoreCoin]

Central bank for Bitcoin? Do you even know what Bitcoin is as a symbol & concept?

I think that is just a collection of banks to insure the BTC deposit.

[lightningmccoin]

There shouldnt be any central bank. Bitcoin is Decentralized right?