On 12/23/2013 8:57 PM, Jason Resch wrote:



On Mon, Dec 23, 2013 at 10:22 PM, meekerdb <meeke...@verizon.net <mailto:meeke...@verizon.net>> wrote:

    On 12/23/2013 6:54 PM, Jason Resch wrote:



    On Mon, Dec 23, 2013 at 5:02 PM, meekerdb <meeke...@verizon.net
    <mailto:meeke...@verizon.net>> wrote:

        On 12/23/2013 12:46 PM, Jason Resch wrote:



        On Mon, Dec 23, 2013 at 2:12 PM, meekerdb <meeke...@verizon.net
        <mailto:meeke...@verizon.net>> wrote:

            On 12/23/2013 9:07 AM, Bruno Marchal wrote:
            Crypto-currencies, like cryptography, can surely help to save the 
freedom
            of privacy and privateness.

            Crypto-currencies does not need to be a pyramidal con, like Quentin
            suspects. They just allowed to create new independent banks which 
can do
            their work "honestly" or not.
            "honestly" is not moral here, but it means that it is attempted, at 
the
            least, to not base economy on lies (which often happens to keep jobs
            despite they became obsolete).

            Money is both the most wonderful economical tool and the most 
horrible
            life goal.

            When money is used honestly, every one (good willing enough) win 
and is
            enriched. But the longer the play, the bigger the liars can win, so
            "those who make money the main goal" crack, and corrupt the system, 
which
            at that moment become pyramidal.
            It is basically a confusion between meaning and use, or goal and 
tool.

            Today, a part of the economy relies on lies, so it is more the 
actual
            bank system which seems to lead us (partially) to a pyramid.
            The existence of crypto-money can help by providing different 
competing
            economies, and can help in making transition (and awakening from the
            lies) more smooth.

            I don't see it as any different than gold or silver.  Banks used to 
have
            reserves of gold or silver and they issued their own script money 
that was
            redeemable in gold or silver.  BUT they always loaned much more 
script
            than they had gold or silver. They relied, quite reasonably, on the 
fact
            that in any given time interval, only few people would want to 
redeem
            their script in gold or silver.

            Now you may say this is "lying", but so long as not done to excess, 
it
            makes for good economics.  Consider and extreme example: Suppose the
            'banker' has no gold or silver at all but he's prepared to loan 
script
            anyway.  Someone comes to him and wants to borrow $1000 to build a 
bridge
            over small river near the town. The banker loans him the script.  
He pays
            for material and labor, which he can do because people believe the 
script
            is backed by gold.  The bridge gets built and so farmers can come 
to town
            much more quickly, productivity is improved and the town thrives, 
so more
            people deposit money in the bank and the banker can actually buy 
some gold
            to back up his script.  "Artificially" increasing the money supply 
can be
            very useful; but just as with all kinds of interactions it depends 
a lot
            on trust.  If nobody trusts anybody else, as now so many people
            automatically distrust their government, then the economy is 
dragged down.

            
http://opinionator.blogs.nytimes.com/2013/12/21/in-no-one-we-trust/?_r=0

            Brent



        One difference I see is that with crypto-currencies intermediaries are 
not
        required for either, 1. safe keeping, or 2. transfers.  If they are 
never held
        by intermediaries then they have nothing to loan out.

        The point of my example is that you don't HAVE to have anything to loan 
out.


    Commercial banks from which people get loans don't create the Federal 
Reserve notes
    they loan out, they need to already have some on hand before they can make 
a loan.
     With bitcoins it is clear you can't loan any out unless they are in your 
possession.

    That's like saying those banks in the old west couldn't loan out gold 
unless they
    had it in their possession. Sure; but it didn't keep them from loaning 
script that,
    according to them, was backed by gold.



This would be considered fraud in any other line of business.

Are you a utilitarian or a moralist? Their script was backed by gold - just not enough to cover *all* the script.


    Of course, our money today is fundamentally nothing but IOUs, which can be 
created
    out of thin air and backed by nothing but a promise. The instability of 
such a
    system arises when debt (which is money in our system) is created faster 
than the
    rate at which the economy grows. Defaulted debt destroys outstanding IOUs 
and
    collapses the money supply.

    Which is the down side when money creation is excessive - but you miss the 
point of
    my example which shows that this same fiat creation of money can also be 
good.
    Fundamentally all money rests on trust.  Even gold is only good because 
people
    believe others will accept it for food, sex, etc.



Trust is not a bad thing to have, but to design a system that inherently requires trust to function and will crash should that trust ever evaporate is a less-than-perfect design.

That's why the Federal Reserve was created and member banks get deposit insurance and have to abide by regulations on what fractional reserves they have. Investment banks could still operate like in the old west - at least until Glass-Steagall was repealed.

Brent

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