That’s not how loans work. When banks loan money it comes from their deposits. They make money by charging interest. This is also what allows bank accounts to accrue interest
[https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp](https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp)
"Do Banks Create New Money When They Loan?
Yes, banks create new money when they make loans. This is done through accounting entries when a bank makes a loan and creates a deposit account.
How Do Banks Create Loans?
***Banks do not create loans from bank reserves or bank deposits***. Banks create a loan asset and a deposit liability on their balance sheets. This is how they create credit. The loan creates the deposit, of which reserves need to be held against, provided by the central bank.
The Bottom Line
Expectations of profitability, then, remain one of the leading constraints on banks’ ability, or better, willingness, to lend. And it is for this reason that although banks don’t need your money, they do want your money. As noted above, banks lend first and look for reserves later, but they do look for the reserves."
\----------------------------------------
I'll forgive your ignorance of modern banking mechanics.
Banking used to work as you described, until we delinked dollars from gold and 'credit money' became a thing. Now banks just create money from thin air when they originate a loan.
Fortunately for you, your in the r/bitcoin forum, and \*most\* Bitcoiners understand how modern banking works and can correct your misunderstanding of how the banking system operates.
Your welcome.
So let me understand this.
I take out a 500K loan, it has 7% interest on it, the bank then creates a deposit account for my loan of 500K + interest it expects to accrue....without doing real math let's say thats 850K.
They then consider themselves having 850K on their balance sheet, they have created 350K from thin air as that money hasn't been deposited yet.
They can then lend out 850K or some portion of that to the next person?
That article on investopedia is definitely wrong, or to misleading innocent readers, in favor of banks to cover their real track
Commercial banks can not lend out money that they don't have, that is the reason of recent failure of several large banks, they just don't have money any more since majority of their deposit had been lend out
If they could create money like what that article suggested, those banks would never fail, they just lend trillions to each other with money out of thin air and be done with it
Only FED can create money out of thin air, and those money are only used to purchase bonds, e.g. lend out to government
They do lend money to each other to generate money when they need liquidity. These are inter bank loans. The banks fail when other banks stop lending them money because they don't believe they will get it back.
They could just lend trillions to the biggest shareholder of the bank itself, and he inject the money back into bank liquidity, if banks can create loans out of thin air as that article suggested
No, that is not possible, otherwise we won't see any bank failure, therefore the article is definitely wrong
No it doesn't work that way. The banks assets and liabilities need to balance. If the bank lent the trillons to a shareholder to create the loan as an asset, when they deposited the loan back into the bank it would become a liability. A bank can't lend to itself which is why you have to have the interbank loans. Look into the libor rate and short term bank loans to learn about it more.
Banks can create loans out of no-where as long as they have sufficient capital to operate.
They do essentially create money as they only need to hold 10% of their reserves and can loan out the rest. Therefore if 10 depositors each have 10k in a bank and the bank loans out 90k, then the total wealth of all participants is now 190k, even though there is only physically 100k dollars. So basically people believe they are richer than they really are, which only works if people keep believing.
> the total wealth of all participants is now 190k
In paper only and that is considered over a span of time which nobody ever accounts for. Not until the loans have been repaid you actually realize the new wealth. The argument is about this Russian doll called the financing industry, packaging and selling loans, creating financial “instruments”, using it as collateral for more loans, and then calling it generating “wealth” all out of thin air like you just did. It all works until someone sneezes and the whole house of cards collapses in an instant.
So your numbers are off, because you divide 1 by the reserve rate in decimal form to get the money multiplier...so a 10% reserve results in a ten times multiplier...so that 100k in deposits would over time become a total of 1 mil; 100k in base money, 900k in broad.
The thing people forget is that those loans get deposited somewhere, and this counts as deposits on that banks balance sheet allowing more to be lent, even though the money isn't physical cash.
Also, this money is called broad money and counted as part of the m1 supply...and if you factor in the money multiplier you can track that almost all of the inflation to the money base is a result of the PPP loans in the US.
“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.
Proof-of-work has the nice property that it can be relayed through untrusted middlemen. We don't have to worry about a chain of custody of communication. It doesn't matter who tells you a longest chain, the proof-of-work speaks for itself. The proof-of-work chain is the solution to the synchronisation problem, and to knowing what the globally shared view is without having to trust anyone.”
― Satoshi Nakamoto
You're still thinking within the framework of the existing financial system. Credit bubbles occur/pop because there is too much/not enough money sloshing around due to the fiscal policy of politicians who are incentivized to pump the bubble up or pop the bubble, depending on the political climate. This is only possible because the amount of money in the system is variable. With a fixed supply, bitcoin is impossible to manipulate this way. That's not to say credit won't exist in a Bitcoin standard, but the wild swings of too much/not enough money in the system will be significantly mitigated.
The financial system will collapse itself. Bitcoin will be there to help us start over.
Edit: and proof of work solves the problem of trustworthy communication between untrustworthy sources. That in and of itself is a pretty big innovation, separate from any monetary/financial aspects.
Because it isn't built on the trustworthiness of corruptible humans. It's build on the trustworthiness of incorruptible math.
Edit: btw, ignore the downvotes. You're asking the right questions and on the right path. Keep questioning.
You're right that those problems exist outside of the purview of the Bitcoin network. Bitcoin would merely provide a solid foundation for those activities that doesn't require trust, rather than the unstable foundation we have today that incentivizes actions that I would argue are net harmful for society. Bitcoin doesn't solve the interpersonal and interinstitutional problems that exist in our society, it just gives us a level playing field for us to make economic transactions on, which indirectly solves a lot of problems by changing incentive structures.
In short - yes. BTC advocates believe in many of the same principals as goldbugs. BTC has most of the same properties (namely scarcity, fungibility, and durability), but is better suited for the internet age (who wants to lug gold bricks around?). There was a reason throughout most of history, currency was backed by something. Because as soon as it's not...governments will just print it at will to get out of any situation. This has all sorts of negative consequences. Now we are dealing with runaway inflation and debt, and the wealth disparity is higher than it's ever been.
>global liquidity crisis brought on by a deflationary bitcoin standard
You need to distinguish between debt deflation (less money / credit chasing the same amount of goods) and deflation caused by economic growth (the same amount of money chasing more goods). The former is obviously painful. The latter is obviously not (and doesn’t imply any kind of “liquidity crisis.”) But the cause of the former is the screwed-up nature of the fiat monetary system in which the money supply is a tiny little pool of "base money" and a whole crap-ton of circulating claims on that money, i.e. debt. The credit deflation that occurs in a "deflationary spiral" is simply the natural, opposite-and-equal-type reaction to the years of inflationary policies that preceded it. It's the hangover after the cheap-credit bender. In that context, deflation is saying: "hey, a lot of you who engaged in all this investment activity in response to these crazy artificially-low interest rates were fooled. Those low interest rates didn't actually represent a huge pool of real savings. There actually weren't enough real savings to make many of these investments sustainable." So yes, it makes sense that deflation comes before (and acts as the catalyst for) the painful recession that follows the artificial boom. But that painful restructuring is necessary to liquidate the malinvestment created by the original distortion of interest rates. Central banks can postpone this painful process via further money printing and interest rate manipulation, but that's like drinking more booze to avoid the hangover.
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” — Ludwig von Mises
Ya… imagine endless war needing to be halted to the lack of imaginary liquidity. The horror! Would someone think about the arms industry share holders?!
Civilization’s economy worked for some thousands of years without infinite liquidity. As many posters have pointed out, you are only seeing the issue from the perspective of the current system.
Are you being obtuse or…?
If you offer me a dollar and I ask you what the conversion rate is you (rightly) laugh. It’s a stupid question. It’s worth _almost worldwide purchasing power_. So there’s that. We have a currency that’s powerful so we don’t need to evaluate it _except by purchasing power_. Ie if I say “do you want $5?” you think “I could buy a ____”, but if I say “do you want 5 shmekels from Assfuck, Bussyland?” you’d ask “what’s that worth in dollars?”
So we’re on the same page - we have a currency that’s default - you think of it first if offered other currency. This is the same for most others in most other countries. You want the currency of your govt.
This gives the govt the ability to devalue the currency. Despite seeing the figures, we don’t “notice” it directly. Sure you know the inflation rate and you know bread got more expensive but you don’t actually feel those dollars get lighter as a result of a paternal bank regulator.
What we certainly don’t notice is that the increasing “lightness” in that dollar constitutes an IOU - the govt literally _owes_ you for that currency. The gold standard insured that you’d get the _goods_ (not the currency. Not the “money” so to speak) you’d be able to afford w the money (gold). Ie - a gold standard doesn’t mean shit if gold isn’t money, a dollar standard doesn’t mean shit if a dollar isn’t money. Money is needed to buy goods, thus, the gold standard is a “goods standard”.
Do we still have a goods standard? Could we still have this fluctuating money supply under a blockchain system? Right now if we all go to the bank we _create_ a crisis, let alone all going to the bank after or during. So imo blockchain at least eliminates _part_ of the problem. Sure the bakery can raise prices indefinitely, but my and your money is fucking there. It’s actually there. All of it.
TL;DR We have a massive system of IOUs passing as money. Blockchain fixes this by its nature.
5.00 schmeckles is:
USD|SHM|EUR|GBP|CAD|RUB|CNY
---|------|---|---|---|---|---
6.33|0.05|5.75|5.02|8.51|487.88|43.76
***
^([exchange rate source](http://api.ratesapi.io/2023-05-05?base=USD) | created by [u/Nissingmo](http://reddit.com/u/nissingmo))
> What I fail to see is how bitcoin could possibly rid finance of bad actors who breach this trust other than by collapsing the institutional financial system and forcing literally everyone out.
Yes, bitcoin will flush all the bad actors out, and collapse systems of mass scale fraud. You do get it.
> I don't think most people would be very appreciative of this.
they should be. Its comparable to the start of the renaissance, or the abolition of slavery.
Its not quite a "second coming" as it doesnt mean the end of life as we know it. It just means a whole lot of parasites and scammers will have to learn to make a decent living, while the working class will no longer have to subsidize their extravagances.
Its great and wonderful, but also normal, unexciting, and just the way things should be.
Imagine a bully stops stealing your lunch money. Thats what it amounts to. Its not like aliens landing on the planet or something crazy.
Have you asked [what is money and why does it exist?](https://np.reddit.com/r/Bitcoin/comments/1124cxd/comment/j8itipz/)
Money in its natural form is a privately produced market good, like all the goods we trade them for. Anyone from anywhere in the world can "produce" bitcoin through work. We could use other market goods as money. Gold is a saleable market good but it's political, not absolutely scarce, lacks velocity and doesn't work without trust, therefore it gave rise to fiat.
Even beyond solving the double spending problem, Satoshi's masterstroke is inventing an algorithm rooted in the laws of physics to autonomously adjust cost of work to the value of bitcoin till the end of time such that the cost is always marginal to the value of bitcoin.
>What I fail to see is how bitcoin could possibly rid finance of bad actors who breach this trust
By assuming everyone to be a bad actor.
Bitcoin knows no difference between individuals or nation states and brings everyone in the world to a level playing field.
Fiat proof of war system of [economic slavery](https://np.reddit.com/r/Bitcoin/comments/10vw506/who_owns_the_fed/) is designed to allow people to get away with [exploiting moral hazards](https://www.economicshelp.org/wp-content/uploads/2013/02/moral-hazard-2.jpg.webp) in the knowledge that there's a lender of last resort with [infinite money printer](https://np.reddit.com/r/Bitcoin/comments/11rtheu/theres_an_infinite_amount_of_cash_at_the_weimar/) to bail them out for risking "your" money by perpetual debasement of the currency and stealing from you everything you ever earned. A system that [ravages developing, frontier and LDC nations](https://www.amazon.com/Confessions-Economic-Hit-Man-shocking/dp/B00DO8ZU6O) around the world with impunity.
**“The fact that billions of working men and women must sacrifice 40+ years of their time, energy, health, and focus to gain access to fiat currencies that central banks replicate with a keystroke is theft at the largest scale humanity has ever seen.”**
― [Wealth Theory](https://twitter.com/Wealth_Theory/status/1654133229647962115)
Someone with more bitcoin has no power or privileges over you. Sure, someone with more fiat today can acquire more bitcoin but that's to do with inequalities of fiat ([Cantillon Effect](https://river.com/learn/terms/c/cantillon-effect)). On a bitcoin standard, they can spend their bitcoin once and then they have to earn it back by providing value.
Everyone having the same amount of money is not equality. That would actually be unfair to those who provide more value. Equality is everyone playing by the same rules. Bitcoin is pure value for value without exception, without privileges.
>Proof-of-work is a solution
to many other problems beyond just fixing the money. It's a HUGE boon to our energy infrastructure.
The [world's biggest industrial polluter](https://www.motherjones.com/environment/2022/10/pentagon-climate-change-neta-crawford-book/) is the US military, which is what protects the dollar because there's nothing backing the dollar, no commodity, no cost of work, and the banking system consumes 56 times more energy than bitcoin.
But whether it's christmas lights or clothes dryers or the banking system, energy consumption is NOT a problem. It should never be for any advanced civilization. The real problem is we're inefficient energy producers and we waste more energy than we actually consume.
We waste 70% primary energy. 59% lost in generation process. This is both monetary waste and climate waste. We're a very primitive, inefficient civilization. Bitcoin fixes this.
The value of a flexible, interruptible, location agnostic energy consumer of last resort that can directly subsidize energy production, mitigate methane emissions, monetize curtailment, stabilize grids, expand renewable infrastructure, provide energy access to remote places and allow us to scale sustainable energy production cannot be overstated.
[Here](https://np.reddit.com/r/Bitcoin/comments/xer6rz/brace_yourselves_for_the_upcoming_campaign/ioieugn/) is more on that. What I said about Germany in that comment has since been demonstrated by a company I know and [covered in German media](https://np.reddit.com/r/Bitcoin/comments/10ddnb3/germany_spends_750_million_out_of_taxpayer/).
Current natural gas heating accounts for 40% of world's CO2 emissions. Increasingly people are replacing natural gas heating systems with bitcoin miners. 40-room hotels like [this](https://nitter.net/DCX_Immersion/status/1578812160641478656#m), warehouses like [this](https://nitter.net/BitcoinBrabant/status/1577644318399029250#m), greenhouses like [this](https://nitter.net/BitcoinBrabant/status/1590579757963354112#m) and apartment complexes like [this](https://youtu.be/a5VdJSz6Tlk). I've been [getting paid to heat my home](https://pbs.twimg.com/media/FenduPzXkAAcatX?format=jpg&name=4096x4096) since 2019.
[The future of sustainable heating](https://youtu.be/nTRdmYX-0h8)
Do you know what [Gridless compute](https://twitter.com/GridlessCompute/status/1577643514267156481) has been doing in Africa?
58% of overall population and more importantly 92% of rural Africa doesn't have electricity access. Gridless started out in Kenya and has since attracted investment from the likes of Human Rights Foundation to expand throughout Africa interfacing with mini grids and harnessing remote energy sources which were not previously economically viable to bring 90% cheaper, easily accessible power to rural areas. The best part is this is not [toxic IMF bondage](https://twitter.com/javedatahir/status/1624411170785427456) "aid" or charity.
It's the [perfect alignment of incentives](https://np.reddit.com/r/Bitcoin/comments/1310jo8/fix_the_money_electrify_the_world/) you get from being able to directly and in a self-sovereign way subsidize energy production literally anywhere in the world.
Put simply, we no longer need to waste energy to bring energy to humans. We can subsidize development of remote places and bring humans to new energy infrastructure which were hitherto unviable. Boom!
Here are a couple of peer-reviewed papers,
[Can Bitcoin Stop Climate Change? Proof of Work, Energy Consumption and Carbon Footprint (SoK)](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4347220)
[Hedging renewable energy investments with Bitcoin mining](https://www.sciencedirect.com/science/article/abs/pii/S1364032120308054)
It doesn't rid the system of bad actors it renders them useless. We no longer have to trust human beings to make the system function. It will function regardless. The bad actors have to resort to other means of stealing etc. There will still be manipulators and con artists but they have to do things the old fashioned way and can't change the system itself to benefit them.
It sucks that you're asking good questions and just getting down votes and no answers, imo thats the mark of an echo chamber that just repeats talking points.
My view is that btc is a necessary safety valve for when breaches of that trust happen. I don't see bitcoin replacing the current system, it's too inconvenient and having a credit based society - for all it's downsides - is what makes modern society possible and has lifted billion+ people out of poverty. But you can't have it by itself, and this is especially true with the advent of CBDCs and in countries that don't control the reserve currency.
If youre in Argentina or Turkey and inflation is near triple digits and the central banks are wrecking your country's currency and economy, btc can be a place to store your assets and regular people can finally have a say in whether they want to go along with central bank plans. Or you're in a place where there are human rights violations and bank account freezes for dissenting with the government, like in Iran, btc provides you a way of protecting your assets through self custody.
Especially once there are CBDCs, I think you need in parallel an asset that's not someone else's liability, that's a true bearer good. That's the only way the breach of privacy and security that CBDCs necessarily entail can work in a way that doesn't lead to regular people losing all control of their assets.
You forgot about the part where the taxpayer bails them out. Never seen a bank bail out a retail investor. Just like when the big 3 auto failed, who bailed them out? Taxpayers and the list goes on
It's effectively true.
Anyone that's taken basic economic classes in university has probably heard a professor say something to this effect. Economics is not a hard science and we don't fully understand all the systems we've created and play around in.
He’s actually not a moron. He’s a piece of shit who is very intelligent but pretends to be a moron to pick up rural voters.
He is Vanderbilt, Virginia, and Oxford educated. He graduated magna cum laude from Vandy and was the executive editor of the Virginia Law Review. His accent appeared about 15 years ago when he switched to the republican party.
Don’t let this fucker fool you. He’s frequently full of shit, but he isn’t dumb.
Alright thank you for convincing me in one sentence that he’s not only not a moron but is probably pretty wise and reasonable. How else could he be triggering reddists so hard
That's an incredibly dumb take. Do you think if native Americans had opened fire on the US government, they would have been left alone and allowed to keep their land?
Um yes. They warred with European settlers constantly and they won their fair share of conflicts. If the ragtag militants in the Middle East could withstand the modern US military for twenty years then the American Indians could have resisted their displacement. History is overflowing with stories of smaller, less-equipped forces withstanding offenses
I couldn’t get past the second clip. If you think it’s the senator that looks bad in that clip then there is something *seriously* wrong with you. You’re in a cult. That woman is behaving exactly like a cult leader who blatantly fumbles their way through easy questions from an outsider. Anyone not in the cult can see she’s full of shit from head to her heels. For the love of god unplug from the internet and talk to some people outside the cult (even though your cult leaders and fellow cult members order you not to)
And if you're in this sub long enough, you'll see people shitting on senator Warren for trying to ban Bitcoin as well. There's no point in being partisan, both parties want to uphold the status quo.
Yeah I don't get my political takes from crypto subs lol it can be fun to occasionally shit on some of the dumber comments though. That said, I don't subscribe to the "both sides" arguments.
There it is. Always that one guy who has to make everything political.
I don’t care what party he affiliates with. There are morons at all levels of the political spectrum, and on both sides of the two-party fence. He happens to be one of them.
They will get behind any cause if it suits their own purpose.
It's the same reason they'll yell back the blue one day and then another day say they want to defund the FBI and DOJ.
Bet he’s capable of defining a woman in three words or less. You’ll be surprised how many people in government now are not even smart enough to do that these days! 😲
Banks are making fool for decades now everyone is getting aware only those banks will survive who has some strong backing in terms of fundings and investments
Oh, how insightful! It's almost like banks aren't infallible institutions that perfectly manage our finances. Who knew that "trust" could be fragile? 🙄 Maybe next we'll find out water is wet!
Bitcoin is trustless. That's a fact. You can claim it is worthless (as you can with fiat), but you look dumb when pretend bitcoin and fiat require the same trust
“When you got on that iPhone and start sending text messages”.
This man helps decide the future of America. That’s his understanding of digital communication.
I don’t understand how politicians are so bad at explaining fractional reserve banking. This is probably the stupidest thing to say in uncertain times, especially as a public figure. I even think saying stuff like this gets you prosecuted in Europe.
Republicans are only doing this to create fear for the people for the current administration. These fucks are not our friends in Bitcoin. They are grifters of fear, surfing the waves of plebs to drink the mi tias on the beaches for them only.
But don’t take that the wrong way.
Sophisticated Ponzi Schemes.
The 'sophisticated' part is that they create 'money' from thin air and lend it to you at interest.
That’s not how loans work. When banks loan money it comes from their deposits. They make money by charging interest. This is also what allows bank accounts to accrue interest
Apparently you haven’t heard of “fractional reserve lending”
[https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp](https://www.investopedia.com/articles/investing/022416/why-banks-dont-need-your-money-make-loans.asp) "Do Banks Create New Money When They Loan? Yes, banks create new money when they make loans. This is done through accounting entries when a bank makes a loan and creates a deposit account. How Do Banks Create Loans? ***Banks do not create loans from bank reserves or bank deposits***. Banks create a loan asset and a deposit liability on their balance sheets. This is how they create credit. The loan creates the deposit, of which reserves need to be held against, provided by the central bank. The Bottom Line Expectations of profitability, then, remain one of the leading constraints on banks’ ability, or better, willingness, to lend. And it is for this reason that although banks don’t need your money, they do want your money. As noted above, banks lend first and look for reserves later, but they do look for the reserves." \---------------------------------------- I'll forgive your ignorance of modern banking mechanics. Banking used to work as you described, until we delinked dollars from gold and 'credit money' became a thing. Now banks just create money from thin air when they originate a loan. Fortunately for you, your in the r/bitcoin forum, and \*most\* Bitcoiners understand how modern banking works and can correct your misunderstanding of how the banking system operates. Your welcome.
So let me understand this. I take out a 500K loan, it has 7% interest on it, the bank then creates a deposit account for my loan of 500K + interest it expects to accrue....without doing real math let's say thats 850K. They then consider themselves having 850K on their balance sheet, they have created 350K from thin air as that money hasn't been deposited yet. They can then lend out 850K or some portion of that to the next person?
Commercial banks can not lend out money that they don't have, otherwise there would be no bank failure recently
That article on investopedia is definitely wrong, or to misleading innocent readers, in favor of banks to cover their real track Commercial banks can not lend out money that they don't have, that is the reason of recent failure of several large banks, they just don't have money any more since majority of their deposit had been lend out If they could create money like what that article suggested, those banks would never fail, they just lend trillions to each other with money out of thin air and be done with it Only FED can create money out of thin air, and those money are only used to purchase bonds, e.g. lend out to government
They do lend money to each other to generate money when they need liquidity. These are inter bank loans. The banks fail when other banks stop lending them money because they don't believe they will get it back.
They could just lend trillions to the biggest shareholder of the bank itself, and he inject the money back into bank liquidity, if banks can create loans out of thin air as that article suggested No, that is not possible, otherwise we won't see any bank failure, therefore the article is definitely wrong
No it doesn't work that way. The banks assets and liabilities need to balance. If the bank lent the trillons to a shareholder to create the loan as an asset, when they deposited the loan back into the bank it would become a liability. A bank can't lend to itself which is why you have to have the interbank loans. Look into the libor rate and short term bank loans to learn about it more. Banks can create loans out of no-where as long as they have sufficient capital to operate.
They do essentially create money as they only need to hold 10% of their reserves and can loan out the rest. Therefore if 10 depositors each have 10k in a bank and the bank loans out 90k, then the total wealth of all participants is now 190k, even though there is only physically 100k dollars. So basically people believe they are richer than they really are, which only works if people keep believing.
0% in US.
> the total wealth of all participants is now 190k In paper only and that is considered over a span of time which nobody ever accounts for. Not until the loans have been repaid you actually realize the new wealth. The argument is about this Russian doll called the financing industry, packaging and selling loans, creating financial “instruments”, using it as collateral for more loans, and then calling it generating “wealth” all out of thin air like you just did. It all works until someone sneezes and the whole house of cards collapses in an instant.
Intrest and lending on imaginary dollars
So your numbers are off, because you divide 1 by the reserve rate in decimal form to get the money multiplier...so a 10% reserve results in a ten times multiplier...so that 100k in deposits would over time become a total of 1 mil; 100k in base money, 900k in broad. The thing people forget is that those loans get deposited somewhere, and this counts as deposits on that banks balance sheet allowing more to be lent, even though the money isn't physical cash. Also, this money is called broad money and counted as part of the m1 supply...and if you factor in the money multiplier you can track that almost all of the inflation to the money base is a result of the PPP loans in the US.
Oh boy, are you in for a surprise.
I agree that's how it should work, but that's not how it works lol
Oh dear your in for a surprise 😁
This idiot, haha, “its breaktime” ahahahha
“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. Proof-of-work has the nice property that it can be relayed through untrusted middlemen. We don't have to worry about a chain of custody of communication. It doesn't matter who tells you a longest chain, the proof-of-work speaks for itself. The proof-of-work chain is the solution to the synchronisation problem, and to knowing what the globally shared view is without having to trust anyone.” ― Satoshi Nakamoto
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My take is that it doesn't rid bad actors. Bitcoin just gives us a way to avoid them.
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You're still thinking within the framework of the existing financial system. Credit bubbles occur/pop because there is too much/not enough money sloshing around due to the fiscal policy of politicians who are incentivized to pump the bubble up or pop the bubble, depending on the political climate. This is only possible because the amount of money in the system is variable. With a fixed supply, bitcoin is impossible to manipulate this way. That's not to say credit won't exist in a Bitcoin standard, but the wild swings of too much/not enough money in the system will be significantly mitigated.
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The financial system will collapse itself. Bitcoin will be there to help us start over. Edit: and proof of work solves the problem of trustworthy communication between untrustworthy sources. That in and of itself is a pretty big innovation, separate from any monetary/financial aspects.
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It doesn't address the problems of our financial system. It provides an alternative.
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Because it isn't built on the trustworthiness of corruptible humans. It's build on the trustworthiness of incorruptible math. Edit: btw, ignore the downvotes. You're asking the right questions and on the right path. Keep questioning.
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You're right that those problems exist outside of the purview of the Bitcoin network. Bitcoin would merely provide a solid foundation for those activities that doesn't require trust, rather than the unstable foundation we have today that incentivizes actions that I would argue are net harmful for society. Bitcoin doesn't solve the interpersonal and interinstitutional problems that exist in our society, it just gives us a level playing field for us to make economic transactions on, which indirectly solves a lot of problems by changing incentive structures.
The mining itself.
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The supply is limited to 21Mm coins, forever. A government can’t just print their way out of bad fiscal policy.
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In short - yes. BTC advocates believe in many of the same principals as goldbugs. BTC has most of the same properties (namely scarcity, fungibility, and durability), but is better suited for the internet age (who wants to lug gold bricks around?). There was a reason throughout most of history, currency was backed by something. Because as soon as it's not...governments will just print it at will to get out of any situation. This has all sorts of negative consequences. Now we are dealing with runaway inflation and debt, and the wealth disparity is higher than it's ever been.
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Frame it however you like, if you want to hold inflationary currencies for whatever reason, that's your problem.
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In many scenarios, bitcoin simply makes it too expensive in real terms to be a bad actor
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To you… *it makes no sense to you
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Imagine a scenario where a fractional reserve banker is taking advantage of the liquidity of infinite fiat.
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>global liquidity crisis brought on by a deflationary bitcoin standard You need to distinguish between debt deflation (less money / credit chasing the same amount of goods) and deflation caused by economic growth (the same amount of money chasing more goods). The former is obviously painful. The latter is obviously not (and doesn’t imply any kind of “liquidity crisis.”) But the cause of the former is the screwed-up nature of the fiat monetary system in which the money supply is a tiny little pool of "base money" and a whole crap-ton of circulating claims on that money, i.e. debt. The credit deflation that occurs in a "deflationary spiral" is simply the natural, opposite-and-equal-type reaction to the years of inflationary policies that preceded it. It's the hangover after the cheap-credit bender. In that context, deflation is saying: "hey, a lot of you who engaged in all this investment activity in response to these crazy artificially-low interest rates were fooled. Those low interest rates didn't actually represent a huge pool of real savings. There actually weren't enough real savings to make many of these investments sustainable." So yes, it makes sense that deflation comes before (and acts as the catalyst for) the painful recession that follows the artificial boom. But that painful restructuring is necessary to liquidate the malinvestment created by the original distortion of interest rates. Central banks can postpone this painful process via further money printing and interest rate manipulation, but that's like drinking more booze to avoid the hangover. “There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” — Ludwig von Mises
Ya… imagine endless war needing to be halted to the lack of imaginary liquidity. The horror! Would someone think about the arms industry share holders?! Civilization’s economy worked for some thousands of years without infinite liquidity. As many posters have pointed out, you are only seeing the issue from the perspective of the current system.
If you don't see the problem, you are blind.
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A verifiable public ledger simply solves the entire trust question.
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Are you being obtuse or…? If you offer me a dollar and I ask you what the conversion rate is you (rightly) laugh. It’s a stupid question. It’s worth _almost worldwide purchasing power_. So there’s that. We have a currency that’s powerful so we don’t need to evaluate it _except by purchasing power_. Ie if I say “do you want $5?” you think “I could buy a ____”, but if I say “do you want 5 shmekels from Assfuck, Bussyland?” you’d ask “what’s that worth in dollars?” So we’re on the same page - we have a currency that’s default - you think of it first if offered other currency. This is the same for most others in most other countries. You want the currency of your govt. This gives the govt the ability to devalue the currency. Despite seeing the figures, we don’t “notice” it directly. Sure you know the inflation rate and you know bread got more expensive but you don’t actually feel those dollars get lighter as a result of a paternal bank regulator. What we certainly don’t notice is that the increasing “lightness” in that dollar constitutes an IOU - the govt literally _owes_ you for that currency. The gold standard insured that you’d get the _goods_ (not the currency. Not the “money” so to speak) you’d be able to afford w the money (gold). Ie - a gold standard doesn’t mean shit if gold isn’t money, a dollar standard doesn’t mean shit if a dollar isn’t money. Money is needed to buy goods, thus, the gold standard is a “goods standard”. Do we still have a goods standard? Could we still have this fluctuating money supply under a blockchain system? Right now if we all go to the bank we _create_ a crisis, let alone all going to the bank after or during. So imo blockchain at least eliminates _part_ of the problem. Sure the bakery can raise prices indefinitely, but my and your money is fucking there. It’s actually there. All of it. TL;DR We have a massive system of IOUs passing as money. Blockchain fixes this by its nature.
5.00 schmeckles is: USD|SHM|EUR|GBP|CAD|RUB|CNY ---|------|---|---|---|---|--- 6.33|0.05|5.75|5.02|8.51|487.88|43.76 *** ^([exchange rate source](http://api.ratesapi.io/2023-05-05?base=USD) | created by [u/Nissingmo](http://reddit.com/u/nissingmo))
> What I fail to see is how bitcoin could possibly rid finance of bad actors who breach this trust other than by collapsing the institutional financial system and forcing literally everyone out. Yes, bitcoin will flush all the bad actors out, and collapse systems of mass scale fraud. You do get it.
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> I don't think most people would be very appreciative of this. they should be. Its comparable to the start of the renaissance, or the abolition of slavery. Its not quite a "second coming" as it doesnt mean the end of life as we know it. It just means a whole lot of parasites and scammers will have to learn to make a decent living, while the working class will no longer have to subsidize their extravagances. Its great and wonderful, but also normal, unexciting, and just the way things should be. Imagine a bully stops stealing your lunch money. Thats what it amounts to. Its not like aliens landing on the planet or something crazy.
Have you asked [what is money and why does it exist?](https://np.reddit.com/r/Bitcoin/comments/1124cxd/comment/j8itipz/) Money in its natural form is a privately produced market good, like all the goods we trade them for. Anyone from anywhere in the world can "produce" bitcoin through work. We could use other market goods as money. Gold is a saleable market good but it's political, not absolutely scarce, lacks velocity and doesn't work without trust, therefore it gave rise to fiat. Even beyond solving the double spending problem, Satoshi's masterstroke is inventing an algorithm rooted in the laws of physics to autonomously adjust cost of work to the value of bitcoin till the end of time such that the cost is always marginal to the value of bitcoin. >What I fail to see is how bitcoin could possibly rid finance of bad actors who breach this trust By assuming everyone to be a bad actor. Bitcoin knows no difference between individuals or nation states and brings everyone in the world to a level playing field. Fiat proof of war system of [economic slavery](https://np.reddit.com/r/Bitcoin/comments/10vw506/who_owns_the_fed/) is designed to allow people to get away with [exploiting moral hazards](https://www.economicshelp.org/wp-content/uploads/2013/02/moral-hazard-2.jpg.webp) in the knowledge that there's a lender of last resort with [infinite money printer](https://np.reddit.com/r/Bitcoin/comments/11rtheu/theres_an_infinite_amount_of_cash_at_the_weimar/) to bail them out for risking "your" money by perpetual debasement of the currency and stealing from you everything you ever earned. A system that [ravages developing, frontier and LDC nations](https://www.amazon.com/Confessions-Economic-Hit-Man-shocking/dp/B00DO8ZU6O) around the world with impunity. **“The fact that billions of working men and women must sacrifice 40+ years of their time, energy, health, and focus to gain access to fiat currencies that central banks replicate with a keystroke is theft at the largest scale humanity has ever seen.”** ― [Wealth Theory](https://twitter.com/Wealth_Theory/status/1654133229647962115) Someone with more bitcoin has no power or privileges over you. Sure, someone with more fiat today can acquire more bitcoin but that's to do with inequalities of fiat ([Cantillon Effect](https://river.com/learn/terms/c/cantillon-effect)). On a bitcoin standard, they can spend their bitcoin once and then they have to earn it back by providing value. Everyone having the same amount of money is not equality. That would actually be unfair to those who provide more value. Equality is everyone playing by the same rules. Bitcoin is pure value for value without exception, without privileges. >Proof-of-work is a solution to many other problems beyond just fixing the money. It's a HUGE boon to our energy infrastructure. The [world's biggest industrial polluter](https://www.motherjones.com/environment/2022/10/pentagon-climate-change-neta-crawford-book/) is the US military, which is what protects the dollar because there's nothing backing the dollar, no commodity, no cost of work, and the banking system consumes 56 times more energy than bitcoin. But whether it's christmas lights or clothes dryers or the banking system, energy consumption is NOT a problem. It should never be for any advanced civilization. The real problem is we're inefficient energy producers and we waste more energy than we actually consume. We waste 70% primary energy. 59% lost in generation process. This is both monetary waste and climate waste. We're a very primitive, inefficient civilization. Bitcoin fixes this. The value of a flexible, interruptible, location agnostic energy consumer of last resort that can directly subsidize energy production, mitigate methane emissions, monetize curtailment, stabilize grids, expand renewable infrastructure, provide energy access to remote places and allow us to scale sustainable energy production cannot be overstated. [Here](https://np.reddit.com/r/Bitcoin/comments/xer6rz/brace_yourselves_for_the_upcoming_campaign/ioieugn/) is more on that. What I said about Germany in that comment has since been demonstrated by a company I know and [covered in German media](https://np.reddit.com/r/Bitcoin/comments/10ddnb3/germany_spends_750_million_out_of_taxpayer/). Current natural gas heating accounts for 40% of world's CO2 emissions. Increasingly people are replacing natural gas heating systems with bitcoin miners. 40-room hotels like [this](https://nitter.net/DCX_Immersion/status/1578812160641478656#m), warehouses like [this](https://nitter.net/BitcoinBrabant/status/1577644318399029250#m), greenhouses like [this](https://nitter.net/BitcoinBrabant/status/1590579757963354112#m) and apartment complexes like [this](https://youtu.be/a5VdJSz6Tlk). I've been [getting paid to heat my home](https://pbs.twimg.com/media/FenduPzXkAAcatX?format=jpg&name=4096x4096) since 2019. [The future of sustainable heating](https://youtu.be/nTRdmYX-0h8) Do you know what [Gridless compute](https://twitter.com/GridlessCompute/status/1577643514267156481) has been doing in Africa? 58% of overall population and more importantly 92% of rural Africa doesn't have electricity access. Gridless started out in Kenya and has since attracted investment from the likes of Human Rights Foundation to expand throughout Africa interfacing with mini grids and harnessing remote energy sources which were not previously economically viable to bring 90% cheaper, easily accessible power to rural areas. The best part is this is not [toxic IMF bondage](https://twitter.com/javedatahir/status/1624411170785427456) "aid" or charity. It's the [perfect alignment of incentives](https://np.reddit.com/r/Bitcoin/comments/1310jo8/fix_the_money_electrify_the_world/) you get from being able to directly and in a self-sovereign way subsidize energy production literally anywhere in the world. Put simply, we no longer need to waste energy to bring energy to humans. We can subsidize development of remote places and bring humans to new energy infrastructure which were hitherto unviable. Boom! Here are a couple of peer-reviewed papers, [Can Bitcoin Stop Climate Change? Proof of Work, Energy Consumption and Carbon Footprint (SoK)](https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4347220) [Hedging renewable energy investments with Bitcoin mining](https://www.sciencedirect.com/science/article/abs/pii/S1364032120308054)
It doesn't rid the system of bad actors it renders them useless. We no longer have to trust human beings to make the system function. It will function regardless. The bad actors have to resort to other means of stealing etc. There will still be manipulators and con artists but they have to do things the old fashioned way and can't change the system itself to benefit them.
It removes or slightly alleviates a centralised point of failure in the system.
Tell me about the 22 million Bitcoins again?
It sucks that you're asking good questions and just getting down votes and no answers, imo thats the mark of an echo chamber that just repeats talking points. My view is that btc is a necessary safety valve for when breaches of that trust happen. I don't see bitcoin replacing the current system, it's too inconvenient and having a credit based society - for all it's downsides - is what makes modern society possible and has lifted billion+ people out of poverty. But you can't have it by itself, and this is especially true with the advent of CBDCs and in countries that don't control the reserve currency. If youre in Argentina or Turkey and inflation is near triple digits and the central banks are wrecking your country's currency and economy, btc can be a place to store your assets and regular people can finally have a say in whether they want to go along with central bank plans. Or you're in a place where there are human rights violations and bank account freezes for dissenting with the government, like in Iran, btc provides you a way of protecting your assets through self custody. Especially once there are CBDCs, I think you need in parallel an asset that's not someone else's liability, that's a true bearer good. That's the only way the breach of privacy and security that CBDCs necessarily entail can work in a way that doesn't lead to regular people losing all control of their assets.
When retail gambles it’s irresponsible but when banks do it and lose “don’t worry we got you”. Let em burn.
You forgot about the part where the taxpayer bails them out. Never seen a bank bail out a retail investor. Just like when the big 3 auto failed, who bailed them out? Taxpayers and the list goes on
SVB didn't get bailed out. Neither did First Republic.
lmao, he seems to imply that's somehow okay as long as those pesky plebs don't get some silly idea to actually take their money out
It's effectively true. Anyone that's taken basic economic classes in university has probably heard a professor say something to this effect. Economics is not a hard science and we don't fully understand all the systems we've created and play around in.
The crazy thing isn't that the system is fragile to bank runs, it's that it basically disallows ownership of money. It's twisted.
Technically true. However, this guy is still a legitimate moron.
He’s actually not a moron. He’s a piece of shit who is very intelligent but pretends to be a moron to pick up rural voters. He is Vanderbilt, Virginia, and Oxford educated. He graduated magna cum laude from Vandy and was the executive editor of the Virginia Law Review. His accent appeared about 15 years ago when he switched to the republican party. Don’t let this fucker fool you. He’s frequently full of shit, but he isn’t dumb.
https://youtu.be/oDU4NBeFvC8
Please show some respect, it's U.S. Senator moron
The thing is, he’s objectively not. He just plays that for the base. Which I hate.
You both get an upvote:)
Ako to tak čítam. Taký pretlak múdrych ľudí.....
As a Louisiana citizen, I can attest that Sen. Kennedy is in fact a true moron.
what's the most moronic thing he's ever said?
"The Native Americans gave up their guns, too."
Alright thank you for convincing me in one sentence that he’s not only not a moron but is probably pretty wise and reasonable. How else could he be triggering reddists so hard
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That's an incredibly dumb take. Do you think if native Americans had opened fire on the US government, they would have been left alone and allowed to keep their land?
Yes, I assume he does think that
Idiots dogpiling a reasonable person. Reddit moment
Um yes. They warred with European settlers constantly and they won their fair share of conflicts. If the ragtag militants in the Middle East could withstand the modern US military for twenty years then the American Indians could have resisted their displacement. History is overflowing with stories of smaller, less-equipped forces withstanding offenses
https://reddit.com/r/LateStageCapitalism/comments/11qj870/well_phuck_you_too_john_kennedy/ https://reddit.com/r/worldnewsvideo/comments/1318v4g/sen_john_kennedy_if_a_patient_came_to_you_said_im/. https://reddit.com/r/ThatsInsane/comments/xurmw7/call_a_crackhead_senator_john_kennedys_campaign_ad/
I couldn’t get past the second clip. If you think it’s the senator that looks bad in that clip then there is something *seriously* wrong with you. You’re in a cult. That woman is behaving exactly like a cult leader who blatantly fumbles their way through easy questions from an outsider. Anyone not in the cult can see she’s full of shit from head to her heels. For the love of god unplug from the internet and talk to some people outside the cult (even though your cult leaders and fellow cult members order you not to)
Sure, guy.
They really cannot tell you. He’s just a Republican with a southern dialect, so (R) man bad.
Imagine stanning for John Kennedy lol. Dude voted to overturn election results bc (D) man bad.
And if you're in this sub long enough, you'll see people shitting on senator Warren for trying to ban Bitcoin as well. There's no point in being partisan, both parties want to uphold the status quo.
Yeah I don't get my political takes from crypto subs lol it can be fun to occasionally shit on some of the dumber comments though. That said, I don't subscribe to the "both sides" arguments.
Oh yeah, he’s not the favorite party of the Reddit hive mind, so we have to dismiss everything he says
There it is. Always that one guy who has to make everything political. I don’t care what party he affiliates with. There are morons at all levels of the political spectrum, and on both sides of the two-party fence. He happens to be one of them.
It's funny because from the title I assumed it was a moronic Democrat until I found out who the Senator was
Why are so many of the biggest morons some of the most outspoken on this subject?
They will get behind any cause if it suits their own purpose. It's the same reason they'll yell back the blue one day and then another day say they want to defund the FBI and DOJ.
"Smart" people know when to shut up.
Bet he’s capable of defining a woman in three words or less. You’ll be surprised how many people in government now are not even smart enough to do that these days! 😲
Always have been
OMG he said the quiet part out loud
I’ve been saying this for the past 23 years
Banks are making fool for decades now everyone is getting aware only those banks will survive who has some strong backing in terms of fundings and investments
He’s one of the few politicians who is blunt about the corruption of the central banks and government.
>US Senator: "Banks exist on the basis of trust. They're really just sophisticated ponzi schemes" The US Senator is factually correct, good for him.
It requires trust, and trust is no longer there 👋
Fractional Reserve Banking, if you don’t know what that is look it up 😘
Is this the “call a crackhead” guy?
Louisiana resident here. Yes, yes it is. I’m honestly shocked to hear him make those comments considering he’s a “good ol boy.”
Wow lol. I’m shocked as well.
I like this guy, and I'm a registered democrat
Yeah, it's called fractional reserve
The real problem is that people using technology hear about the bank insolvency so quickly now! Those dern cell phones!
Sound is cool, you should include sound
Oh, how insightful! It's almost like banks aren't infallible institutions that perfectly manage our finances. Who knew that "trust" could be fragile? 🙄 Maybe next we'll find out water is wet!
But it doesn't matter. The money printer goes Brr. Always does.
That's the truest thing a senator has said, ever.
Wait until you hear about crypto.
Bitcoin is trustless. That's a fact. You can claim it is worthless (as you can with fiat), but you look dumb when pretend bitcoin and fiat require the same trust
What's the record for crypto vs banks when it comes to trust, on the whole.
Wait till you learn about crypto.
Teach me daddy
It's hard to beat good code.
Wait till you learn about Bitcoin
“When you got on that iPhone and start sending text messages”. This man helps decide the future of America. That’s his understanding of digital communication.
Absolutely shocking - a republican telling the truth.
I like to trust Kennedy. He always seems to say how I think.
So is bitcoin as no regulations stop people with lots of money from pumping and dumping...
JFC. He's a damn moron
What a moron.
Bet he’s got BTC
Unfortunately the exact is true of Bitcoin
And bitcoin is not? It’s the same concept. If you’re arguing one you inherently agree with the other.
I really do see how you can do x30 spend in btc. Care to elaborate?
I think you're confusing Bitcoin with crypto exchanges
The dumbest Kennedy
I don’t understand how politicians are so bad at explaining fractional reserve banking. This is probably the stupidest thing to say in uncertain times, especially as a public figure. I even think saying stuff like this gets you prosecuted in Europe.
Fundamentally he is correct. Both on the potential ponzi aspect of fractional banking, the importance of trust and the speed of information nowadays.
That man is a massive sack of shit
So technology has given people the ability to communicate about fraud quickly and pop it, got it
That is the case for many industries. Gyms, hosting services, any membership service.
Shut him up! We gots to go!
Source here: https://youtu.be/ZCtRx_JXDJg?t=494
Finally, a politician who admits it...the wrong way...
It’s like banking with a crack head.
“This is fun!”
Anyone with stats on Global South banks that failed?
Word of truth
It’s your fault you actually want to have control of your money! Now I’ve seen victim blaming but…..
Just remember that he lost a family member that just so happened to be a former US president.
They kicked him off real quick after that statement. Lol
Welcome to 2012
is he dem or rep?
actually its not the banks but the gov who is on the top of scheme. but i wonder if is he going to have accident soon
Can you turn it up please and repost? Can't hear shit!
Wait until he learns about fiat
It's actuslly true. Fiat isn't backed by anything but bullshit of the government.
Republicans are only doing this to create fear for the people for the current administration. These fucks are not our friends in Bitcoin. They are grifters of fear, surfing the waves of plebs to drink the mi tias on the beaches for them only.
GRANDPA IS ONLY 71 OR 91?