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The article's claim the non-bitcoin money/economic system is fundamentally "based on" debt is just silly. Think about it: governments create money "by fiat" an

by javert 14y ago

The article's claim the non-bitcoin money/economic system is fundamentally "based on" debt is just silly. Think about it: governments create money "by fiat" and then pay people with it and collect it from people. FIat money is not debt. My having dollars doesn't mean I am in debt, nor does it mean anyone is in debt to me. Credit and debt are fundemantal to economics, and will exist in any economy. (As they should - without loans and other forms of debt, people would not be able to get the capital they need to do things they need to do to get more capital. They are basically good things.) By the way, there are alreay people lending bitcoins and thus there are already people who owe debts expressed in bitcoins. There are already bitcoin banks, bonds, options, stocks, and insurance (and probably other things). As a bitcoin user, I've seen this firsthand.

javert 14y ago
By the way, if someone wants to explain the author's perspective on the current economy being fundamentally based on debt, I'd like to hear that. I don't really understand his perspective.
- cgs1019 14y ago
  Check out Khan's lectures on banking. they're very illuminating.
- morsch 14y ago
  I think the point is not that the economy is based on debt, but the monetary system, namely fractional reserve banking, is based on debt. Of course the monetary system is the basic infrastructure of our economy, so it's not exactly wrong to expand the argument. Money as Debt is an entertaining 45 minute video on the topic. It's considered to be somewhat partisan, though, and I'm not that it's entertaining for everybody. http://vimeo.com/2244372 http://vimeo.com/2244372 http://en.wikipedia.org/wiki/Money_as_Debt http://en.wikipedia.org/wiki/Money_as_Debt
Tuna-Fish 14y ago
> Governments create money "by fiat" and then pay people with it and collect it from people. FIat money is not debt. Actually, the typical way modern central banks create money\* is by giving out loans (consisting of money they just created) to banks, which must post some collateral for it. When it's paid back, the money returned to the central bank is destroyed. This is done to create a "spring" effect in the money supply -- as having money in existence has a cost, it prevents too much liquidity pooling up in the economy. If the banks are not using the money, they want to pay it back to the central banks to get rid of the interest payments. \* Most money is not created by the central banks, but by the commercial banks, by using fractional reserves to "multiply" the money supply. However, fractional reserves always use the central-bank-created "base money" as the base they multiply.
nhaehnle 14y ago
My having dollars doesn't mean I am in debt, nor does it mean anyone is in debt to me. Technically, this is incorrect. Dollar bills are a debt of the central bank. Take a look at the Fed balance sheet, you will find that dollar bills are considered a liability from their point of view. This has interesting consequences. If you consolidate the Treasury and the Fed - which is valid from an economics point of view, since they are just different branches of government (no matter what the Fed conspiracy people may tell you) - then both dollar bills and treasury bonds are just different types of debt of the government. It just so happens that dollar bills have zero maturity and zero coupon (interest). Once you understand that, it is only a short step towards asking why the hell everybody is so concerned about the federal government debt. If it was really desired, one could just swap all treasuries for dollar bills - and the only primary effect is that it changes the yield curve for government debt from almost zero everywhere to zero everywhere. I find this fascinating. If you asked a random person (including myself three years ago) what would happen if all the government debt were paid off with paper money, they would tell you - slightly paraphrased - that the world would explode. But when you look into the technical details, you find that it's just this subtle change in the yield curve. So what's going on there?

by javert 14y ago

javert 14y ago

By the way, if someone wants to explain the author's perspective on the current economy being fundamentally based on debt, I'd like to hear that. I don't really understand his perspective.

cgs1019 14y ago
Check out Khan's lectures on banking. they're very illuminating.
morsch 14y ago
I think the point is not that the economy is based on debt, but the monetary system, namely fractional reserve banking, is based on debt. Of course the monetary system is the basic infrastructure of our economy, so it's not exactly wrong to expand the argument. Money as Debt is an entertaining 45 minute video on the topic. It's considered to be somewhat partisan, though, and I'm not that it's entertaining for everybody. http://vimeo.com/2244372 http://vimeo.com/2244372 http://en.wikipedia.org/wiki/Money_as_Debt http://en.wikipedia.org/wiki/Money_as_Debt

Tuna-Fish 14y ago

> Governments create money "by fiat" and then pay people with it and collect it from people. FIat money is not debt. Actually, the typical way modern central banks create money\* is by giving out loans (consisting of money they just created) to banks, which must post some collateral for it. When it's paid back, the money returned to the central bank is destroyed. This is done to create a "spring" effect in the money supply -- as having money in existence has a cost, it prevents too much liquidity pooling up in the economy. If the banks are not using the money, they want to pay it back to the central banks to get rid of the interest payments. \* Most money is not created by the central banks, but by the commercial banks, by using fractional reserves to "multiply" the money supply. However, fractional reserves always use the central-bank-created "base money" as the base they multiply.

nhaehnle 14y ago

My having dollars doesn't mean I am in debt, nor does it mean anyone is in debt to me. Technically, this is incorrect. Dollar bills are a debt of the central bank. Take a look at the Fed balance sheet, you will find that dollar bills are considered a liability from their point of view. This has interesting consequences. If you consolidate the Treasury and the Fed - which is valid from an economics point of view, since they are just different branches of government (no matter what the Fed conspiracy people may tell you) - then both dollar bills and treasury bonds are just different types of debt of the government. It just so happens that dollar bills have zero maturity and zero coupon (interest). Once you understand that, it is only a short step towards asking why the hell everybody is so concerned about the federal government debt. If it was really desired, one could just swap all treasuries for dollar bills - and the only primary effect is that it changes the yield curve for government debt from almost zero everywhere to zero everywhere. I find this fascinating. If you asked a random person (including myself three years ago) what would happen if all the government debt were paid off with paper money, they would tell you - slightly paraphrased - that the world would explode. But when you look into the technical details, you find that it's just this subtle change in the yield curve. So what's going on there?