Bitcoin & the crypto-currency revolution. (get some here).

[pErvinalia]

Regarding governments creating new money, that short video I linked shows how it happens. Also, look up Quantitative Easing in wiki. It explains it there as well. It's not directly the gubment doing it, but the reserve banks are controlled, more or less, by governments. So the Fed, or whatever central reserve, that is chaired and guided by government appointees, can decide to create new money when the government (or economy) is in need of it.

The thing about individual banks creating money with the fractional reserve banking is not generally considered creating money, as it is fully accounted for. I'm pretty sure that long article I linked earlier discussed this too. There obviously is a potential catastrophic problem in that system (as far as I understand it) and that is if everyone (or a majority) of people called in their debts at the same time. There wouldn't be enough money supply in the system to repay those debts. But as I said, I'm not sure if that has ever happened before. Usually the banks at the behest of the government shut up shop to stop runs, and open again when things are more stable. But that assumes that things can become stable again. Perhaps we are reaching a point where that is becoming more and more unlikely.

[mistermack]

Bitcoins appear to be in freefall today.
One single bitcoin has lost fifteen dollars value in a day. That's about twelve percent. What's up?

[mistermack]

It's just lost another five dollars in an hour. What's going on, anybody heard anything?

[mistermack]

Amid Silk Road uncertainty, Bitcoin value drops over 20% in 3 hours

http://arstechnica.com/information-tech ... n-3-hours/

[JimC]

Amid Silk Road uncertainty, Bitcoin value drops over 20% in 3 hours

http://arstechnica.com/information-tech ... n-3-hours/

See this thread: http://www.rationalia.com/forum/viewtop ... 22&t=45864

Two points come out of this:

1. The strong link between bitcoins and the dark web

2. Governments can and will intervene into alternative financial structures if they want to badly enough...

[pErvinalia]

Goddamnit! Where am i going to get my drugs and guns now?!

[Skepticus]

The thing about individual banks creating money with the fractional reserve banking is not generally considered creating money, as it is fully accounted for. I'm pretty sure that long article I linked earlier discussed this too. There obviously is a potential catastrophic problem in that system (as far as I understand it) and that is if everyone (or a majority) of people called in their debts at the same time. There wouldn't be enough money supply in the system to repay those debts. But as I said, I'm not sure if that has ever happened before. Usually the banks at the behest of the government shut up shop to stop runs, and open again when things are more stable. But that assumes that things can become stable again. Perhaps we are reaching a point where that is becoming more and more unlikely.

But rev, This...

The thing about individual banks creating money with the fractional reserve banking is not generally considered creating money, as it is fully accounted for.

... is not consistent with this:

There obviously is a potential catastrophic problem in that system (as far as I understand it) and that is if everyone (or a majority) of people called in their debts at the same time

Obviously, if there is a shortfall in the overall money supply, then the money created by private banks is not accounted for in the important sense of 'accounting for' something.

What accounting means in this sense, is simply that the banks have to follow the fractional reserve rules. The money created for loans, goes to customers to spend on whatever they buy, say, a car. The money is accounted for by ensuring that to money goes to the customer and then to the seller of the car. That money can circulate through the banking system or be withdrawn as cash at some point, but the only accounting is to ensure the banks do not create money for themselves directly by simply typing figures into their own accounts. That and of course that they make loans according to the charter of fractional lending. That's no consolation whatsoever. The loans are NEW money being created and released into the system as fast as people can borrow. The capital of the loan is simply typed into the borrowers account, literally at the stroke of a keyboard. The rules off accounting by which you seem to think makes this all OK. are not OK. For starters there's the interest. Where does that come from? It doesn't get created with the loan and isn't created anywhere else either. Where is the interest supposed to go? It goes into the banks presuming Joe Blow can find enough money to meet his obligation. But obviously there isn't enough in the system. There's only the capital created in the first instance so the money for paying interest, relies on borrowings of other people from whom Joe Blow will earn his money from. Those people must get their money to pay Joe from the overall money supply. There is no interest accounted for IN that supply. When loans are paid off, the banks have made their tidy sum but they have taken their money up to the high rollers table and left a deficit amongst ordinary citizens. They may spend all of their interest earnings back into the economy eventually, but it doesn't ever payback the deficit in the economy because that interest was never created.

The only reason it even seems to work temporarily, is that the money created as debt is spent on stuff in the real world which enables economic growth that fosters larger sums of money to be borrowed and spent at interest. To support growth we have three options:

• Either we magically get more efficiency/productivity on demand or...
• We continue to borrow and spend larger amounts per head of capita or...
• There must be growth in population.

The percentage of growth that might be expected from constant ongoing innovations in productivity/efficiency are minuscule by comparison to the growth in debt. Besides that efficiency gains and innovations a not the sort of thing you can count on. You can't account for future improved productivity. It's incidental. The second option is just about exhausted. People can't afford to take on any more debt in their lifetimes. That leaves population. To feed the banks with interest they don't create, so we can live off the debt they produce as money, we have to breed new customers for the banks. Only if the economy grows at a rate faster than the interest deficit will there be enough money in the system to stave off economic collapse. Now MOST of the economic growth is fueled by growth in consumption and incidental, marginal productivity/efficiency gains not withstanding, the requirement for economic growth to feed the hungry debt monster, requires an almost proportional growth in demand for resource use.

Our opulent lifestyles in the west, have not been funded by and large by the ongoing development of innovations and efficiency gains, but by increased consumption per head of capita and/or by increased population, but overall by consuming more and requiring more from natural resources. Banks and the Govt/Fed debt money system have lead the charge here by making unsustainable spending possible and making sure they get a cut from the positive side of the balance sheet (i'm just talking about money here).

Banks account for the money they control, by making an asset of a negative quantity of future productivity (a loan). That productivity is allowed to be spent as if it were a positive value. It is also partially re-lent over and over in a recurively nested series of new loans. In the real world, things of positive value that have real limits. Negative sums are hypothetical speculations on future value (not yet realized). The people doing all the work to produce the productivity are the ones paying with real (but unsustainable) productivity, while the banks take a commission for simply issuing and controlling the debt money that merely represents the real value of that productivity. Furthermore, whet is a negative value (deficit/debt) on the borrower side of the balance sheet, is turned into a positive on the fed/bank side. They end up with the positive value (asset) and the population circulate the negative value (liability) as money. Can you see how this is back to front? If banks had to accumulate (positive value) money to lend and always keep in reserve the amount equal to their interest, things might be different, but by being able to lend into existence, something they don't yet posses, the create a deficit money system that has no means of ever being restrained. They also plunder from the system a hefty slice of the lie which creates a shortfall, that can only be met with expansion of the money supply. That expansion I refer to is NOT government quantitative easing or any such thing but perpetual recursive bank credit from every consumer loan that is taken out.

I hope you get your Internet back soon so you can watch Money As Debt. Also; you might learn something from this PDF file: Where Does Money Come From. It's just a single page, written by the author of producer of Money As Debt and it cuts to the chase. I'm wondering if you think there are any discrepancies in it.

[pErvinalia]

Sorry, I'm pretty much burnt out on this topic now. But I did nearly correct/elaborate on that point you picked up (but didn't coz I couldn't be bothered. But now that you've mentioned it... ). I thought more about it, and you know what, it's not a problem because the money does actually exist in the system. The problem is that the terms of loans are all different. The only problem occurs when depositors come to get their money out in too large numbers. Because banks only hold 10% or thereabouts of actual cash reserves, then they can only handle a total of 10% withdrawals at any one point. But that doesn't mean the rest of the money doesn't exist in the system. The problem for banks are that they can't just call in their debts. They sign debt contracts out to 30+ years, with no ability to break those contracts on a whim. But the legal terms of depositors accounts are that they can break the contracts but just have to pay a price. But that price won't make up for the other 90% of loaned out money. What I understand happens in these points is that the individual bank can loan money from the central reserve (i.e. I think new money is created) to cover any short term shortfall. What happens to that potentially new money in the system after the banks stabilise and get their accounts back in order, I don't really know. It would be interesting to find out. I'd assume it is paid back to the fed and destroyed. But that would be sensible, and "sensible" and "financial system" don't really go together that often in my book .

[pErvinalia]

Just a bit more... I don't know for sure that the central reserves lend banks new money. It might be literally "reserves". The central reserves do make income from the government bonds they buy (i.e. the make interest on the new money they create). Say the Fed buys a $100mil bond, in a year's time it will get say $102mil back. So there's $2million profit. The questions that I'd love answered at this point are what happens with the original new $100mil - does it get destroyed at that point - and what happens with that $2million - does it sit in "reserve" or does it get disbursed to the member banks and government?

[Skepticus]

Amid Silk Road uncertainty, Bitcoin value drops over 20% in 3 hours

http://arstechnica.com/information-tech ... n-3-hours/

See this thread: http://www.rationalia.com/forum/viewtop ... 22&t=45864

Two Four points come out of this:

1. The strong link between bitcoins any form of cash currency and the dark web the black market

2. Governments can and will intervene into alternative financial structures criminal activity (that happen to be traceable through methods at their disposal) if they want to badly enough...

3. That crypto-currency and onion routing anonymity have succeed in foiling authorities, who we can now see, were obviously trying very hard to get their man. i.e. It wasn't bitcoin or Tor that failed, despite very deliberate efforts.

4. Oh! And I's a great time to buy bitcoin from panicky idiots.

[pErvinalia]

That number 4 is a good point... :handrubbingtogetherplottingsmiley:

[Skepticus]

Goddamnit! Where am i going to get my drugs and guns now?!

And don't forget, you'll have to resort to using gubbmint cash money, just like 99% of the population does and 100% have done since drugs were ever sold.

[Skepticus]

That number 4 is a good point... :handrubbingtogetherplottingsmiley:

Bit late if you had no account on an exchange all ready to buy. The price is back up to $128 at this point and rising. We've seen it all before and we'll see it again. Some shit happens panic merchants panic, the price drops for a day or two then bounces right back. See you on the other side of $140.

[mistermack]

That number 4 is a good point... :handrubbingtogetherplottingsmiley:

Bit late if you had no account on an exchange all ready to buy. The price is back up to $128 at this point and rising. We've seen it all before and we'll see it again. Some shit happens panic merchants panic, the price drops for a day or two then bounces right back. See you on the other side of $140.

You constantly and deceptively quote the higher Mt.Gox price, rather than the more realistic Bitstamp price.

Nobody can actually GET the headline price at Mt.Gox. It's a false price. If you have bitcoins, and want to sell them for dollars, you have to use another exchange, like Bitstamp. At the moment, the Bitstamp price is 18 dollars less than Mt.Gox.
Then, on top of that, you have to pay the Bitstamp charges. So your Bitcoin, which you are claiming is worth 128 dollars, will probably get you about 100 dollars. To get any more, you have to take a big long-term gamble.

Mt. Gox prices are higher than on Bitstamp today because customers apparently can’t get their dollars out of Mt. Gox. So they pay extra for bitcoins. For those customers, a Mt. Gox bitcoin is different from one anywhere else. So the Mt. Gox price isn’t a clean measure of a bitcoin’s value. Instead, it measures the value of a bitcoin plus the desperation of Mt. Gox’s customers.

But that still leaves a puzzle. It makes sense that customers will pay a premium to get their money out. But who is willing to take the other side of the trade, selling bitcoins in return for “Mt. Gox dollars”?

As best as I can tell, those traders have stayed silent on the bitcoin chat boards. Perhaps they are newcomers who think they’ve found an arbitrage opportunity and don’t realize their dollars will be hard to withdraw. Or perhaps they believe that Mt. Gox will get its act together. (A more sinister take, raised on the boards, is that some preferred traders do have the ability to withdraw.) Whatever the case, they stand to make a tidy profit if they can get their dollars out, and sorely disappointed if they can’t.

http://www.forbes.com/sites/beltway/201 ... nomic-law/

[mistermack]

Bit late if you had no account on an exchange all ready to buy. The price is back up to $128 at this point and rising. We've seen it all before and we'll see it again. Some shit happens panic merchants panic, the price drops for a day or two then bounces right back. See you on the other side of $140.

Yeh right. It's risen to $126 from $128.

If you knew what the price was going to do, you'd be the only one in the world who did.
You're the one who was encouraging people to buy in at $140 dollars.

Now it seems if you want to sell, you can't get much more than $100 return in cash. I think your credentials as a financial adviser are a bit weak.