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I'm well aware of how bitcoin works, and for starters bitcoin isn't completely anonymous. It's semi-anonymous. Secondly, a bank doesn't have to practice fractio

I'm well aware of how bitcoin works, and for starters bitcoin isn't completely anonymous. It's semi-anonymous. Secondly, a bank doesn't have to practice fractional reserve banking, they can practice Full-reserve banking. In this case the deposit to the bank is really a loan to the bank, with the bank promising an interest rate on the loan. On your point of interest rate, interest rate can't be truly guaranteed in any system, and a run is prevented in a full-reserve banking system, because it's not a deposit it's a loan. Now, I'm not saying anyone should actually try to do these things. In fact I agree that Krugman is missing the whole point of bitcoins to the point where he doesn't even bring up it's semi-anonymous nature. I simply wanted to counter his argument that commodity currency wouldn't allow the economy to grow, but as I said earlier bitcoin isn't a regular commodity. It is a currency whithout intrinsic value.

jpdoctor 15y ago
> they can practice Full-reserve banking. ??? A bank makes money by taking deposits (giving interest) and then lending them out (collecting a higher interest). The reserve percentage is that amount that remains unlent. Full reserve = no loans = no profits = no bank. Edit: Yes, you can practice full-reserve with a negative interest rate, which is effectively a safe-deposit box does (they charge a fee for the box). That is the tl;dr of the wiki link.
- theschwa 15y ago
  http://en.wikipedia.org/wiki/Full-reserve_banking http://en.wikipedia.org/wiki/Full-reserve_banking
- DennisP 15y ago
  A negative interest rate actually makes sense in the presence of deflation, and if bitcoins turn into a serious currency, deflation is pretty much guaranteed.