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They have government backing to issue new money (in the form of debt). That’s quite different when you remove the government backing.

baby 5y ago
It took a few bank runs to get there though. The government backing is also 50/50.
- onethought 5y ago
  Are you talking about a specific country? My point was only to point out the very material difference in having a producer of a currency back the production. In Crypto the miners cannot suddenly issue more currency, meaning there is an inherent risk of capital grid-lock. I get this is a trade off for the other benefits of crypto but it's one people should be aware of, and why you can't treat it the same way... or rely on it the same way.
imtringued 5y ago
One of the weird parts of fiat banking is that a public institution is almost 100% privatized. This is fine during normal times but during crisis it doesn't work because we want to keep the public institution part alive, which involves saving the private companies that caused the problem.
- jkhdigital 5y ago
  Banking has never been a public institution. Even now the Federal Reserve System is not, in fact, a public entity. It is chartered by the federal government but does whatever it wants within that charter. There are no elected officials at the Fed.
  - bumby 5y ago
    Having elected officials is not what constitutes a public institution. CFR 417.201 defines a public institution as “an institution that is operated by or controlled by the Federal government, a State, or a political subdivision of a State such as a city or county.” For example, as you stated the government sets the Fed charter and thus enumerates their powers and duties. Congress also pays their salaries, so (to a very limited extent) the Fed receives government funding to operate and reports to Congress for accountability. Most federal “public institutions” do not have elected officials, but rather are led by appointees, just like the Fed.

baby 5y ago

It took a few bank runs to get there though. The government backing is also 50/50.

onethought 5y ago
Are you talking about a specific country? My point was only to point out the very material difference in having a producer of a currency back the production. In Crypto the miners cannot suddenly issue more currency, meaning there is an inherent risk of capital grid-lock. I get this is a trade off for the other benefits of crypto but it's one people should be aware of, and why you can't treat it the same way... or rely on it the same way.

imtringued 5y ago

One of the weird parts of fiat banking is that a public institution is almost 100% privatized. This is fine during normal times but during crisis it doesn't work because we want to keep the public institution part alive, which involves saving the private companies that caused the problem.

jkhdigital 5y ago
Banking has never been a public institution. Even now the Federal Reserve System is not, in fact, a public entity. It is chartered by the federal government but does whatever it wants within that charter. There are no elected officials at the Fed.
- bumby 5y ago
  Having elected officials is not what constitutes a public institution. CFR 417.201 defines a public institution as “an institution that is operated by or controlled by the Federal government, a State, or a political subdivision of a State such as a city or county.” For example, as you stated the government sets the Fed charter and thus enumerates their powers and duties. Congress also pays their salaries, so (to a very limited extent) the Fed receives government funding to operate and reports to Congress for accountability. Most federal “public institutions” do not have elected officials, but rather are led by appointees, just like the Fed.