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> So I started reading everything I could about our monetary system and learned that it essentially became a ponzi scheme in 1971. Even if you want to argue th

by nickik 6y ago

> So I started reading everything I could about our monetary system and learned that it essentially became a ponzi scheme in 1971. Even if you want to argue that all fiat money are 'ponzi schemes' then it would have been a ponzi scheme many times over. In fact if you assume the pre 1971 system to be ok, then it might surpirse you to learn that it only came into effect in the late 1950s. That system (Brandon Woods system) actually was not even close to a real gold standard and didn't operate like one either. I don't see how you can say its not a ponzi scheme while those system before and after it were. If anything Brandon Woods was a US controlled ponzi scheme where the US could inflate their currency while pretending it was gold to other currencies. So the system you think of as non-ponzi existed for 10-20 years max. And before that it was a ponzi scheme again? It was also a ponzi scheme in and post WW1 if that is the case? Not even sure what it means to be a ponzi scheme for money. In a ponzi scheme you pay interest on old money with new money, that is very different from the goal of a monetary system. The way you talk about it, it seems to me you read a heavily 'bitcoin fan' recommended literature on monetary history. What you say is very far away from almost all academic literature on money.

arbitrary_name 6y ago
Do you mean Bretton Woods?
cryptica 6y ago
Maybe it was a ponzi scheme before 1971 in the sense that they were probably printing more bills than they had gold (even though the bills claimed that they could be redeemed for gold). But the fact that banks knew that there was a limit on how much gold they could create was in itself a good way to prevent the money supply from growing out of control. There will always be some banks who don't play by the rules. >> In a ponzi scheme you pay interest on old money with new money, that is very different from the goal of a monetary system. That is literally what they do. Why do you think a dollar is worth a bit less every year? When regular banks make loans to people, the loan money is new money that they just typed into your account out of nowhere (only limited by reserve ratios which coincidentally have been lowered to 0%), then for example, when you buy a house from someone else using that new loan money and you allow them to pay off their debt, you're just paying the person who was there first. New generations take out new loans to pay for the loans of old generations collectively.
- nickik 6y ago
  > But the fact that banks knew that there was a limit on how much gold they could create was in itself a good way to prevent the money supply from growing out of control. There will always be some banks who don't play by the rules. Banks are still restricted by the same mechanism as before, just that now the mechanism is not backed by gold. The central bank is in full control of how much lending can be done. > That is literally what they do. Why do you think a dollar is worth a bit less every year? Because the central banks WANTS the dollar to be worth a bit less every year. Because economist determainted that is the right way to do things. And because it is known that this happens its included in loan contracts. That is why economist stress predicitibility. In a ponzi scheme you don't have enough money to pay the interest and pay back everything, this however is not the same with fiat currency. The amount of fiat currency you can create is not limited by anything other then the choices of the central bankers.

by nickik 6y ago

arbitrary_name 6y ago

Do you mean Bretton Woods?

cryptica 6y ago

Maybe it was a ponzi scheme before 1971 in the sense that they were probably printing more bills than they had gold (even though the bills claimed that they could be redeemed for gold). But the fact that banks knew that there was a limit on how much gold they could create was in itself a good way to prevent the money supply from growing out of control. There will always be some banks who don't play by the rules. >> In a ponzi scheme you pay interest on old money with new money, that is very different from the goal of a monetary system. That is literally what they do. Why do you think a dollar is worth a bit less every year? When regular banks make loans to people, the loan money is new money that they just typed into your account out of nowhere (only limited by reserve ratios which coincidentally have been lowered to 0%), then for example, when you buy a house from someone else using that new loan money and you allow them to pay off their debt, you're just paying the person who was there first. New generations take out new loans to pay for the loans of old generations collectively.

nickik 6y ago
> But the fact that banks knew that there was a limit on how much gold they could create was in itself a good way to prevent the money supply from growing out of control. There will always be some banks who don't play by the rules. Banks are still restricted by the same mechanism as before, just that now the mechanism is not backed by gold. The central bank is in full control of how much lending can be done. > That is literally what they do. Why do you think a dollar is worth a bit less every year? Because the central banks WANTS the dollar to be worth a bit less every year. Because economist determainted that is the right way to do things. And because it is known that this happens its included in loan contracts. That is why economist stress predicitibility. In a ponzi scheme you don't have enough money to pay the interest and pay back everything, this however is not the same with fiat currency. The amount of fiat currency you can create is not limited by anything other then the choices of the central bankers.